I have all my workspace and everything set up on Windows 7 but I also want to develop Windows Phone 8 but as stated on Microsoft website that It can not be installed on Wind
Here is a link from developer.nokia.com wiki pages, which explains how to install Windows Phone 8 SDK on a Virtual Machine with Working Emulator
And another link here
AFAIK, it is not possible to directly install WP8 SDK in Windows 7, because WP8 sdk is VS 2012 supported and also its emulator works on a Hyper-V (which is integrated into the Windows 8).
You can install it by first extracting all the files from the ISO and then overwriting those files with the files from the ZIP. Then you can run the batch file as administrator to do the installation. Most of the packages install on windows 7, but I haven't tested yet how well they work.