Win 7 is not a sure all. It may have better driver support for hardware of its day but that's the question ... is your sound hardware of this day ? If it's a XP system, your hardware may be outdated and therefore not supported by Win 7.
Step 1 - Install XP (Done)
Step 2 - do all the windoze updates
Step 3 - install the sound drivers for your hardware.
It doesn't sound like a fault with XP just a case of drivers not installed. That could just as easily happen with Windows 7. Go to the manufacturer's site for your sound card (or motherboard if it's on-board sound), find the appropriate XP drivers and install them.
Windows 7 may be a useful upgrade, depending upon you hardware, but to consider installing it just to solve a sound problem is overkill IMO.
Brand new Mobo, just wanted to stay with XP as didn't want the change to 7.
At SP3, and then re-installed manufacturers drivers (using driver detective). No sound! I am fed up uninstalling and re-installing drivers to get it working. Decided to either remove SP3,2,1 and see when the fault clears. Or go to 7