Several points. First, and foremost, there is no direct upgrade path from XP to Windows 7. XP will be a clean, bare-metal install. Some have said you can upgrade to Vista then to Win 7. This might work, but I can see a lot of potential incompatibility and conflict problems going that way. You're better off stripping your C drive and doing a clean install of Win 7. You will need to get Windows 7 drivers for that motherboard, and you will have to reinstall all applications. Good time to weed out the junk you don't really need.
Secondly, the report was correct in that the onboard G41 graphics "accelerator" is pretty slow. It won't support Aero, or much beyond a browser. There are several inexpensive video cards available, such as the NVidia Gforce 8500 or 9400 cards, among many others, for under $100US. Please note that you must disable the onboard video, in BIOS setup, if you use a video card.
Third, you are only using one stick of 4GB memory. The mobo will support two sticks, and I recommend you add the second (identical) stick . That will effectively double your memory bandwidth, by enabling bank interleave. If you want to stay with 32-bit Windows (your machine supports 64-bit), replace the single 4GB stick with two, identical, 2GB sticks. You will only see 3.5GB in Windows Properties, but this is normal. The top 500MB is shadowed by system addresses.
Finally, the motherboard in that system is rapidly approaching it's use-by date. In the XP world it was fine. In the Windows 7 world it's near obsolete. It, and the CPU, should be replaced as soon as you can manage it.