You can't do an upgrade as such - you will need to back up your data and do a clean install of Windows 7 (or 😎 -- XP cannot be directly upgraded to either. You will then need to restore your data from the backup and then reload your applications (Office, etc.).
The system will run Windows 7 32 Bit or Windows 8.1 32 Bit without any problem. It will only run Windows 7 64 Bit or Windows 8.1 64 Bit if a T7200, T7400 or T7600 processor is installed. However the maximum RAM the system can use even under the 64 Bit version of Windows will still be limited to 3.24 GB.
System drivers are available here:
For best results follow my A Clean Install of Windows: