As you may remember the system requirement from XP to Vista meant you had to buy a new machine and be prepared for it to actually perform worse than your older XP computer. Luckily Windows 7 gained some performance back but with the 64bit version you can upgrade easily and efficiently for less than $400 (not including software).
Windows 7 likes more memory and 4GB will fit in most older machines also with the 64bit version the old memory limit disappears. Thanks to dropping prices, $100 will buy you 4GB of memory and if your motherboard can handle it 8GB is less than $200. For example: NCIX 4GB DDR2 Memory
The next big performance jump is an SSD (Solid State Drive). For about $250 you have a very fast 120GB drive (use as the OS Drive) and can use your old drive as the data drive (makes migration really easy). SSD read much faster than the older mechanical drives but write speeds are about the same, this makes booting and loading programs very quick. Here’s a few examples of SSD: NCIX Solid State Drives
Lastly you need the new operating system, Windows 7 Professional 64bit. If you are buying a drive I suggest you get the OEM version and save a good deal of money ($160 vs. $325 but you need a storage device purchase to qualify). The ‘Home’ version lacks the domain abilities, no point in getting 32bit and Ultimate is over priced. Some examples: NCIX Microsoft Operating Systems
The actual upgrade process is about 2 hours and you’ll have a dual-booting system (BIOS selectable) and be mildly stunned how much faster it is. Consider getting MS Office 2010 Home & Business if you’re still using a 2003 version of Office, it’s worth the upgrade and you get 2 license for about $300.