Windows 7 will have better support for the newest technologies... not to mention DX 10 & 11 support. Despite what others have claimed, DX 10 for XP is non-existent and there definately won't be DX 11. Performance-wise, you're not going to notice a difference... unless your hardware has poor XP or poor Windows 7 support. Get at least 4GB of RAM and go 64-bit.
I agree with Zoron that you're not likely to see any significant difference in performance. You should upgrade if you think the new features are worth it, not because you think your machine will run faster.
If you do decide to upgrade, IMHO you should go for the 64-bit version (assuming you don't have any unsupported older hardware). That will give you the option of adding up to 8GB of RAM later, even if you stick with 2GB for now. RAM is one of the cheapest upgrades you can do, and if you don't have enough memory to run all the stuff you want then it can make your system run a lot faster.
Although RAM is meant to be cheap, atm DDR2 ram is about the same price or higher in some cases. Not sure exactly why this is, but you can still find some cheap ram from some or all sites.
DDR3 is going mainstream. Manufacturer's are winding down DDR2 production and ramping up DDR3, therefore, DDR3 prices start to shift lower. This is part of the reason RAM prices are so high when they initially come out, drop during peak production, then rise again as production drops when newer parts come out.
You're going to have to upgrade to Windows 7 at some point in order to use DirectX 11 that your 5770 supports.
Given that everything else on your spec list is now at the end of its life technology-wise, I'd suggest spending a little cash to give it one last hurrah - get your 5770, upgrade to 8GB RAM, get a decent CPU cooler (if you don't have one already) so you can give your CPU a good overclock and go Windows 7 64-bit.
You'll breathe a few more years of life into that system then.
Personally I'd just get the Home Premium edition of Windows 7 if you're gaming, but if there's some features on Professional or Ultimate that you like then by all means go for that instead.
There's nothing wrong with the Core 2 the OP has at the moment if he's just gaming, and whacking in 8GB RAM before it gets expensive is far cheaper and will extend the system's life by a good couple of years.
I have an 8 GB system and while I agree with your statement, there is a reason for getting 8 GB... I was worried if I got 4 GB now I would have trouble finding a 2nd matching kit... so while I wholeheartedly agree that 8 GB is overkill for 99.9% of the people out there, there is still a good reason for making the jump now. However, if you're talking about taking an older rig to 8 GB with DDR2? Pfft... that's just silly.
Having just read lastest post, double checked OP's original post and its currently 2gb of ddr3. So, upgrading ram to 8gb is worth it, plenty future proof and will also mean no future problems with finding a matching kit.
This happend to me, I installed 4gb all was fine and now that im upgrading and NEED (virutal machines and other good uses) more ram, Im paying either same or more than what I orig paid for the same ram when I originally bought just 4gb.