If you are smart, get Vista Ultimate, and get 64Bit (64bit is the future) might as well get ready now unless this is a "for now" Computer.
Everyone says 2GB of memory will do it, but my 64Bit Vista idles at 1.76GB of memory lol...
If your CPU isn't x64 compatible then and only then would i get 32bit. keep in mind Vista was made for 64Bit and was then written for 32bit, and from my personal experience its allot more stable than 32bit.
Also don't install Vista as the "Upgrade" do a custom install and Dual boot. Its just the smart thing to do. you dont lose XP and your not dead in the water if and when Vista doesnt work and if you need help figureing out how to dual boot, email me.
I know for a fact if you dont have experience with Vista you will most likely install it multiple times. and if you Dual boot you dont lose XP.
Ah yea, forgot, the reason you dont do the upgrade is because it makes your XP Key no longer Valid!