Don't upgrade to Vista.
Also, you can't upgrade unless you have an external drive(just making sure you know), or make a usb bootable ISO.
I think you should upgrade to linux instead, and have a linux netbook. Just what I would do. It would run much smoother and such.
But then again there's the compatibility issue, and I'm assuming you're a Windows user? In which case just stick with the XP it has.
I also recommend Tigerdirect, as you can get an extended warranty and stuff I think. If not you have a manufacturers warranty(well, I'm fairly sure you do).