You are fine. Your laptop will run either 64-bit or 32-bit Windows. Furthermore, a Windows license allows you one install of either 64-bit or 32-bit. So you don't need to buy anything or upgrade anything.
Edit: Unless you are using Home Basic or Starter Edition...which if I recall you don't get from Dell in the developed world.
You don't need to uninstall XP, you just need the computer to start running the CD without first booting into Windows. The setup.exe for Win64 is itself a 64-bit program that will not run from a 32-bit operating system. The solution is to run it "directly" so to speak. My guess is your computer is not set to boot from CD and you'll have to follow the instructions for changing that. I had a job where I used to do this several times a week, but its not easy to explain and every computer is slightly different. If that page doesn't do it for you, there are probably other tutorials on YouTube.
Make sure Dell has WIN7 64 bit DRIVERS for your laptop. Typically they are linked out of the support page for your laptop.
Make a backup.
Decide if (1) you want to do an in-place upgrade (leaves most programs still installed, can have problems if you have programs that run under XP byt not under win7 or not under win7 64 bit) or (2) you want to do a CLEAN install. that will lose all your data. Save everything you need on an external hard drive first. Unplug teh external drive before installing win7. Clean install usually behaves better than upgrade install. Also gets rid of all the extra marketing material Dell puts on your PC.
Thanks to everyone who responded.I'm finally up and running.Needed to call Dell for the drivers,Thankfully I still have a year on my contract w/them.it took 3 hours to get everything I needed installed.Two more questions,I've been using Panda security for a few years now and I think It's way to intrusive,What's a good security system ? also are there any free programs similar to Microsoft office or word that I can install?
Microsoft security essentials is a free download from MS. Google it. Uninstall panda before installing MS stuff.
Open Office is the free equivalent to MS Office. Has spread sheet, word processor, presentation stuff, etc. I had a learning curve coming from excel (work) to openoffice (home). things are different. http://en.wikipedia.org/wiki/Openoffice