Gaming and Windows 7

Some Windows XP games do not run on Vista or 7, but they are usually older games. Star Wars: Knights of the Old Republic I & II for example.

But both games Star Wars: Knights of the Old Republic I & II run on my PCs on both Win 7 Ultimate 32bit and 64bit.

Older 16 bit games (mostly win95 and win98) will not run in any 64 bit version of windows. 32 bit games should run fine.

I believe Windows 7 Ultimate will has a mode to run XP games

XP mode in win 7 uses MS Virtual PC which does not support DirectX, so you can't play games in XP mode. This is more for business apps.

+1 to what Hawkeye said. You can use Virtual XP that's available from Microsoft's website to play games that are not supported on Windows 7.

@OP: If you are upgrading to Win7, then I'd make sure that you have at least 2GB RAM especially since you're gaming and also, I'd make sure yo get a 64bit version of Windows. No need to go for Windows 7 Ultimate, as it's just a bit too costly and contains features that most common people won't even use.

You contradicted yourself, by giving me a +1. I said XP mode can't play games. Also it's only available in three versions of Windows 7 - Professional, Enterprise and Ultimate.

Didn't quite see that you wrote 'doesn't'. Aren't you talking of Virtual XP ?

Yes, I'm talking about XP mode in win 7 which uses MS Virtual PC. It doesn't support DirectX or at least not Direct3D, thus can't play games in it. Unless this has changed since the original specs for XP mode, you will not be able to play games in XP mode.

have a good look at this article:
http://www.firingsquad.com/hardware/windows_7_gaming/

they test all of the highest 'feature-packed' versions of windows.
arma II proves a single game can run better on windows 7
the game also proves it can run faster on 64bit operating system.

You can run all games in Windows 7 using comp-ability mode and for older games you can use this software named Dos Box i use it run Turbo c in windows 7 64*bit

Doesn't Windows 7 come with both the 32-bit and 64-bit disks? Mine did. You can probably install both then dual-boot as per your needs, if you need to have the option of the 32-bit OS open to you.