Upgrade Solve Original OS Problems?

On a machine with WinXP Home.
This machine has serious OS problems. For instance, it cannot access the Windows update site, repeating an error message that the knowledgebase doesn’t recognize. This is only one of the series of difficulties this OS is having.
The question is this:
If the OS was upgraded to WinXP Pro, utilizing a purchased upgrade product, would this correct these problems, or would they be transferred to the new OS?
Also, on an upgrade, there is no formatting involved, so am I correct in assuming that there is also no loss of current applications and saved files already on the system?