You still need a license to upgrade from. Otherwise it would not be an upgrade anymore. Installation and license upgrade are two totally different things my friend.
I believe what he is saying is that there are no checks required from Win7 for a previous version. I know. I've done it. Yes, I DID have a legal copy of XP before hand, but I did a complete wipe and unpartitioned my drive before installing the win7 64 bit upgrade disk. It went right through and activated without ever asking for the XP disk or license key. I've been using win7 for nine months now without a single glitch, warning, lack of updates, etc etc. In my mind, it is perfectly legal, considering the fact that I *DID* in fact have a legal copy of XP (and license key) and am no longer using said copy of XP since I installed Windows 7.
Now, if one does NOT have a qualifying copy of XP or Vista and installs an upgrade media for windows 7 (opting to do this instead of purchasing a full version copy) then yes there is the possibility of legal repercussions, but that does not necessarily mean that it won't install and work.
The point of our posts (or at least mine) is not to claim that it is ok to purchase an upgrade disk and use it as a full install (without owning a qualifying copy of XP or Vista previously), but to let you guys know that it is NOT NECESSARY to perform an upgrade installation (i.e. installing windows XP and THEN installing windows 7 over it), as this type of installation is known for being extremely problematic, especially on a system that is not running 100% perfect (I would guess at well over 99.9% of systems are NOT perfect).
Actually, while an upgrade installation CAN be performed over Vista, it CAN NOT be performed over XP. Basically, a windows7 upgrade disk will perform a full installation with XP systems.. wiping and reformatting the hard drives, which means you'd lose anything not backed up. Even if I were to upgrade from Vista, I would still backup, wipe, format, and install 7 anyway.
Don't confuse everyone with the whole "installation and license" difference. This is like me stating that my car can go 100mph and you arguing that it cannot because the speed limit is only 55mph. We're not talking about this from a legal standpoint, we're talking about this from an "ability" standpoint.
Now, keep in mind that my statements are based on LAST YEARS windows7 family upgrade pack. It is quite possible that Microsoft changed some thing during the last several months, but even so, I'm 99% certain that you can still do a full installation onto a blank hard drive using Windows 7 upgrade media, however if they were smart they would now at least require you to type in the old operating system's license key.
I should also note that OEM (System Builder) Versions of windows 7 are often cheaper than upgrade versions (except for the family packs).