You can go higher with that. That motherboard will handle a Core 2 Quad and some overclocking but the problem is that those things are becoming pretty scarce and if you do find them, theyre usually pretty pricey if new. You can find ones like a Q9550 for $200-300 on Ebay but youre having to buy used which is risky.
Honestly, it does look like youre looking at a complete motherboard and CPU swap. This shouldnt be that big a deal since youre already wanting to swap to a different OS.
If you live near a Microcenter, they have insane deals on Intel procs right now with a 2500K going for $170 and a 3570K going for $190 I believe and they have $40 off a motherboard when you buy it with a CPU.
However, if you dont live near one, youre still not too bad out of luck. You can get a 13-2120 for $130 and you can pick up a Z68 or Z77 motherboard for under $100 fairly easily. Stick a set of $25 RAM in there, install your new copy of Win7 and youre set.