If your laptop can handle Windows 7 I would then take a backup of all of your data on the laptop. The Windows upgrade might not reformat your hard drive, but better safe than sorry. Then it is basically inserting the Windows 7 disk and following the prompts to install the OS.
I personally would suggest you have over 2GB of RAM in your computer as a general guideline to run Windows 7.
depends what you're doing with it. I'd check the hard drive first, for sure. I use acronis drive monitor to check the SMART data but you could also use the built-in diagnostics, if the laptop has em.
Other than that, the processor and (assuming no upgrade) 1 gb of ram are pretty paltry for running windows 7, any reason you're upgrading in the first place? If you're worried about the XP out-of-support issue, I'd just get a whole new PC (Even a 300 dollar dell saturday night special will outperform this if you upgrade it.) and keep this one around offline to do whatever you would otherwise in winxp mode (which I have had less than stellar experiences with.)