Windows 7 Home Premium Retail - and you'll never look back. MS don't ever bother you with the actication - other than a possible phonecall if it doesnt work properly. Retail is worth the extra $$$ fer sho.
As for the upgrade, well, wehn I 1st got Win7, I actually did an in-place upgrade from XP-32bit to Win7-64Bit, can't remember exactly how i did it - but almost everything worked straight up after the install.
I did however, decide eventually to do a full format and fresh install and found that it was quite a bit faster.
Fresh installs are always the best way to go.
Win 7, is faster in every way that XP. I have no clue why people continue (other than the cost I suppose) holding on to XP.