Yes, it is possible. I have both the 32-bit and 64-bit installation of MATLAB on my machine, running Windows 7 64-bit. And yes, I would highly recommend installing the 32-bit in a different directory (I believe the problem is with the parentheses in the path). My 32-bit MATLAB is installed in C:\MATLAB_32bit.
To launch the 32-bit installer, you need to navigate on your installation DVD to bin\win32 and run the setup.exe file in there.
If you have both a 32-bit and 64-bit installation of MATLAB on the same machine, be aware that they share the same preference directory. This means, amongst other things, that when you switch from using one to using the other, you need to run mex -setup to set up the correct compiler (32-bit vs. 64-bit).