I dont believe you can upgrade a 32 bit os to 64 bit, so you would have to buy the full win 7. As for video cards I would recommend something like this:
http://www.newegg.com/Product/Product.aspx?Item=N82E16814161297
The 4850 is a pretty good card, better than the 8800gt. It will play your games at max without any trouble. If you want something a little more powerful you could go with the 4870 for about $30 more, something like this:
http://www.newegg.com/Product/Product.aspx?Item=N82E16814131140