You can't upgrade Xp to Windows 7. You can use a Windows 7 upgrade disc to install Windows 7 though. It will format the drive and full install. You have to use the Custom option then follow directions. Backup any important files to another drive or form of media.
yup +1 Ripley and Shuffler, my mistake I should have said you can but can't upgrade from XP, Windows 7 does a full install which is better anyhow. I have said this before but I run a dual OS windows 7 and kept my XP Pro.
When putting in a new OS I like to always clean install because I will mirror the new OS. As i add the updates , peripherals and drivers, application software, I will make more mirror images till I am done. Ever have problems just go back to my mirror image and reinstall.