Use Disk2Vhd and be more productive
Actually Windows XP can't be upgraded to Windows 7. you can use Disk2Vhd to take your actual Windows XP system and convert it to a Virtual Hard Drive File then you can make a clean install of Windows 7 and using Virtual PC you can mount your Windows XP VHD file on it.
With this scenario you can iteract with both operative systems at the same time and step by step you can migrate all your applications that are runing in windows XP to Windows 7 by installing and testing then on it.
Without Disk2Vhd you can do it but it's less productive because you have to install the new Windows 7 system in another partition and to iteract with Windows XP you have to restart on the other partition, this consume a lot of time.
To me the most important point is that you can have your Windows XP system right in your Windows 7's desktop.