The upgrade package will include both 32 and 64 bit versions.
If you have more than 4gb of ram, you will want a 64 bit os to access the extra, but it is not essential.
Yes, you can install w7 32 bit. I have done so with the express purpose of being able to run civ2.42, a 16 bit program.
You can try the 32 bit upgrade install, but if your current os is having issues, I would not want to perpetuate them.
A clean install erases all the current hard drive and starts anew.
Before a clean install, find and download the laptop drivers to a usb drive.
Also protect and save anything you need. You will need to reinstall your apps.
After windows loads, you can then easily install the needed drivers.
I might suggest that this would be an opportune time to change to a SSD. It will absolutely transform the performance of your laptop.
I have done this on all my laptops with great results.
If you should have any problems, your original hard drive will be unchanged.
If you buy a SSD large enough to hold your current data, you could clone the hard drive to the ssd, and then try the upgrade in place option.