Traditional to Roth IRA Conversions and the 1-year time limit.?

In October 2006 I rolled over my old 401k to a new traditional IRA at Vanguard, where I had an existing roth IRA. This year I wanted to take advantage of my low tax-rate and convert the new traditional/rollover IRA into the existing roth IRA, which I did last month. The people at Vanguard explained to me that this would be a taxable event, without penalty. So can I claim that distribution in my income tax at the end of 2007 and pay the applicable taxes without taking any distributions from the IRA? In addition, I would like to transfer the roth IRA to Fidelity and am wondering if I can do that now or do I have to wait until March 2008?