After trying to rebuild my data for a month, I have got it all back today. Luckily I didnt need the data during this time. Ok below is the solution for others who find themselves in a similar situation.
Recap...
When I had Snow Leopard, I installed windows 7 with bootcamp. Within windows I resized my windows partition and created a new drive E:\ for my data files, Every thing was great and E:\ has all my data from over last year and a half. Also had set up my backup schedule to run once a week.
December 20th 2012 - D-Day
I upgraded to Mountain Lion and the OS worked great. However when I booted into Windows 7, my E:\ has disappeared and my computer management widget shows an unallocated block where my E:\ once resided.
You can see screenshots of my partitions in both Windows 7 computer management and Mountain Lion Disk Layout in my posts above.
The Solution...
Looked for data recovery solutions online and homed in on EaseUs Partition Master at http://www.easeus.com/partition-recovery. Installed the free version in windows 7 and ran the Data Recovery ->Partition Recovery Wizard -> Search all lost files automatically.

It took a while, about 3-4 hours, but after that I could not believe my eyes when I saw my entire folder structure with all my files from my missing partition.

However the free edition only recovers 1 GB of data, so I went ahead and purchased it for $69.95.
This software does not recreate the partition, but allows you to restore the lost files and folders to an existing drive. It also warns you not to select the same disk as destination as it may overwrite the space used by the lost files thus preventing 100% recovery. So I went ahead and recovered the files to my pen drive.
Now I had to recreate the partition from the unallocated space in Windows7 computer management screen. But then I would again face this problem when upgrading to Mac OS X 11 in the future I will have to redo these steps again. So I decided to configure the partition in OS X rather than windows 7 and format it as FAT.
I went ahead and created the partition in OS X and Quick formatted it as FAT. When I created the partition, I was warned that this action could possible affect my boot record (or something to that effect). I ignored it and went ahead.
A new problem surfaces
Now when I restart the MAC, windows 7 is missing from the list of bootables. But the solution to this turned out to be very simple.
See Christopher Murphy's detailed explanation in the discussion here https://discussions.apple.com/thread/4144252?start=0&tstart=0. I just read through the 1st few posts on this discussion to restore the windows 7 bootable option when restarting.
To conclude
Thanks Christopher Murphy from the other discussion for help on the 2nd half of the problem.