Lets say there is no "upgrade path" from XP to windows 7, and even if there was it would not be any form of insurance.
Then say a Drive costs about $79 USD and would provide you with a nice fresh drive to fresh install windows 7 on, and still have your data from the previous system. That $79 is going to be a drop in the bucket compared to paying someone to recover data, or endlessly dealing with possible unknowns from using methods other than fully clean install, and reinstall of your programs and data. Like say this method, which costs $10 more :-) http://www.zinstall.com/products/zinstall-xp7 And doesnt come with a free drive , a backup , and still requires a second computer to get them from.
After you get done installing a nice clean fresh untainted windows 7 on your nice new fresh disk that will last a long time. Then you get to properly install the programs you need under that system, so they will work correctally in most situations. You could apply that other disk to hold incramental backups of the system, if you ever run into problems.
and lets make sure that we point out to you, that it takes ~7 times as much space to store a Windows 7 system compared to XP (eventually) So dont skimp on the drive space allowed for the window 7 system partition.