Read this wiki for a more comprehensive information:
https://www.os2world.com/wiki/index.php/How_to_tame_Win_7_%28written_for_eCS_2.0%29
Actually, that info is very old, and some of it is no longer correct. While the rest of your instructions will probably work (eventually), it is much easier to follow the instructions in the README files, in the root of the ArcaOS installer DVD.
It is not necessary to install windows first, but installing windows will overwrite the MBR, including AirBoot. If you are still using the antique Boot Manager, it will change the boot pointer so that it boots windows. The fix is to boot the ArcaOS installer, go to the System Management menu, under Disk, select Manage Volumes (Graphical), and redo the Air Boot installation. Only use Boot Manager, when Air Boot will not work (I have one old machine where that is true).
Yes, I did make the partitions with DFSee first which, for me, appears to be the main requirement.
DFSEE will work, as long as it is running under OS/2. It will do it wrong if you are running under any other operating system. I highly recommend using the tools in ArcaOS to partition any (physical) drive that OS/2 will use. That means ALL of the partitions, not just what OS/2 will use. Depending on the original disk setup, you may need to wipe the drive first (probably a good idea anyway, just to be sure that it configures properly).
Then, make sure that no other partitioning tool ever touches any of it, or you will likely have problems.
The big problem I have is that AirBoot menu does not show up so I have to time when to select the win 7 partition to boot which means that I hardly ever boot win 7 now (no great loss).
I thought that problem was resolved. If not, please follow up at Arca Noae (IF you have a current subscription).