windows 7 - you'll feel the difference
about the grafix card - can you install the latest catalyst driver for your card? that way you'll manage with windows 7. If you cant find the driver - let windows update take care of that. I just installed windows 7 ultimate x86 on my brothers gaming rig 2days ago , really flash!
best windows so far apart from XP, heres my brothers specs
Intel E4300 @ 1.8 Ghz
Transcend 2GB (2x1GB) DDR2 800+Mhz (overclocking modules w/ 4-4-4-12)
xfx Nvidia 7600GT
WD caviar SE 320 GB