well windows xp only has up to direct x 9, and windows 7 has direct x 11, giving acces to new graphic features.
There are VERY few games made only for DX 10 or later, and the games that are made for the newer DX versions do not really have much noticeable difference in graphics with the newer direct x.
either should be fine, but do you really want a 10 year old OS on your machine?
With windows 7, no longer any good reason to stick to XP.