Before I upgraded, I was running a desktop with a 1.86GHz core 2 duo and 2GB RAM with Win7 for a while. Worked great.
After using Windows 7, I can't stand using XP (at work). Win7 is a really slick operating system. I say go ahead with the upgrade if you plan to keep your laptop for a while. If a new laptop is on the horizon, just stick with XP.