In the last couple of months I have upgraded all of our home computers to Windows 7. This consisted of upgrading one Vista64 desktop and two WinXP32 laptops. I bought all of the software on eBay in the $50-70 range.
The experience went very well. The only upgrade path for XP computers is to do a fresh install of the OS. This requires all of your software to be reinstalled after the upgrade. But the installer copies all of the current folders into a new folder so there is no need to worry about it wiping the drive or reformatting. All of your files are still there. You would need to watch out, though, if you have data that you will need to export before the upgrade, such as email (including rules!), SQL data, source control, etc. If your data is flat files, no worry, they will be there, otherwise be very careful... Also, if there are multiple user accounts you need to make sure you get all of the data exported for the others, too. The fresh OS upgrade is very quick, since it only installs the OS files and lays down a new Registry. The most work it needs to do is to identify and install drivers needed for your hardware.
On the Vista box, I chose to upgrade it rather than install a fresh OS. It seemed to go OK, but was very slow. I'm talking several hours, like 5 or 6. In retrospect, I would do the fresh install. I am still considering doing that, even now. The reason I didn't is for the reasons I mentioned above: email, SQL data, source control databases, and settings configurations in various applications that would need to be exported and saved.
Overall, I highly recommend Win7 for everyone. It has an outstanding user experience.
For comparisons, here are examples of vanilla Vista and Win7 desktops.
This is an example of the Windows 7 installer screen.
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