Can I or can't I upgrade XP to Windows 7?

There is no direct upgrade path from XP to Windows 7. That is, if you start the Windows 7 installation, you cannot choose to upgrade the current OS and install Windows 7 "over" XP. Microsoft is providing, primarily for enterprises that have many XP machines to migrate, a tool called the Microsoft Deployment Tool 2010 that uses "hard links" to retain certain files and settings, including your user data and user preferences, and then do a clean install of Windows 7 and restore these to the correct location in the new OS. However, this does not preserve your applications as an in-place upgrade does; you'll still need to reinstall them. The tool is a free download and available to anyone, not just enterprises. You can read more about it and see a video of how it works here: Click Here