My 2 cents worth: the retail home edition of Windows 7 is a whole lot better than the OEM version of XP I was running. Getting rid of all the junk the OEM version loads on the system makes an amazing difference, you won't believe how many unwanted "helpful" things they set to start up every time you boot up. For example, right now there are just 14 processes running on this system (press ctrl-alt-esc and select the "processes" tab to see), compared to dozens with the OEM version of XP I was running last year.
If you're going to spend the money on something new, go for Windows 7 and not Vista. Windows 7 is newer and will be supported longer than Vista will, and all reports I've seen says it runs much better.