Bige420,
The Windows 7 Upgrade DVD will be valid with a previously purchased copy of Window XP -- yes. However, you will not be able to perform an "in place upgrade" from XP to Windows 7.
There are several reason why we at Microsoft do not support an in place upgrade from Windows XP to Windows 7. We realized at the start of this project that the “upgrade” from XP would not be an experience we think would yield the best results. There are simply too many changes in how PCs have been configured (applets, hardware support, driver model, etc.) that having all of that support carry forth to Windows 7 would not be nearly as high quality as a clean install. This is something many of you know and already practice. We do provide support for moving files and settings and will prompt at setup time, but applications will need to be reinstalled. We know that for a set of customers this tradeoff seems less than perfect, but we think the upfront time is well worth it.
For additional assistance with the migration of Windows XP to Windows 7, Microsoft does have an official Windows 7 RC Support Forum located here
http://tinyurl.com/9fhdl5 . It is supported by product specialists as well as engineers and support teams. You are welcome to check the threads there and receive additional assistance and feedback.
Jessica
Microsoft Windows Client Team