Should I use the Toshiba media-creator or install a clean version of Windows-7
If the copy of Windows that came with the laptop doesn't contain very much extra junk, using the Media Creator would be easier. That way all the extra drivers for your laptop will already be installed and ready to go. Otherwise you'll be hunting around the Internet and Toshiba's website for up-to-date drivers and some components may not work optimally until you've installed and configured them. The side effects can range from minor (not being to able to adjust your panel's brightness easily) to severe (several power-saving optimizations are disabled and greatly reduce your battery life).
Windows-7 from an ISO download (am I allowed to do that? If so, what is a good site to download?
Yes. You have a valid license to the software. See this answer to another question for direct download links.
Before reinstalling, I'd recommend finding tools that will backup and restore your Windows (and, if applicable, Office) activation information. It makes reinstalling just a tiny bit easier and more painless. I've used ABR before with Vista, but haven't needed to try the beta version for Windows 7 yet. There may be better alternatives available, but I don't have any personal experience with them. You shouldn't need to do this with OEM tools that reimage a system -- they should be pre-activated. This step is generally only needed if you want to do a clean install.
Do I have the option of installing a 32-bit version of Windows-7 instead of 64-bit with the above license?
You could, but you shouldn't. If your system has 4 or more GB of RAM, you'll need 64-bit Windows just to take advantage of it all. There are very few reasons for anyone to be running 32-bit Windows on a reasonably modern system. 64-bit Windows has no problems running 32-bit software.
Assuming I don't have the option of clean-install, will I be able to create the extra partition for linux using the Toshiba utility?
You'd have a much easier time doing that from the Linux installation. Most Linux installers target switchers and will include a utility to let you resize your existing partitions in the installer. As ChimepImp mentioned though, install Windows first, then Linux. The Windows setup will overwrite the bootloader while most Linux installers will detect the Windows installation and offer dual-booting as a standard option.
Of course, if you do a clean install, you can repartition the drive from the Windows setup and leave unallocated space for a Linux partition too.