The Washington Post’ website has an article about five things that users should know when upgrading to Windows 7 from XP.
First, users need to know that XP cannot be upgraded directly to 7. Second, since users could not make a direct upgrade, they could first upgrade to Vista then to 7. By doing it this way, they would avoid a clean install of the operating system.
The third thing on the list notes that users should use the Windows 7 Upgrade Advisor tool to scan for hardware and software compatibility issues. Next is about making a backup and the last thing is about the new firewall application in 7.
Source: The Washington Post

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Lee
So you can go from xp to 7, but what a hassle.
Q: How weak can the vista version in between can be and what of an impact can it have ?
I mean is doing update and SP1 on the middle vista a lost of time ?
Look to me like “It can but msft don’t allow it”
I followed this to do mine and a few customers. It is good.
I have also used a Vista Virtual Machine to upgrade to Win7 from XP… it’s not hard.
http://www.blogsdna.com/3217/step-by-step-guide-to-upgrade-windows-xp-to-windows-7.htm
Here’s my own firsthand experience:
Since I’d been running the beta for a few months, I wasn’t in a panic to get the full version; thought I’d get it in a couple of weeks.
As Murphy’s Law would dictate, I had a phenomenal system crash that took out my newest 500GB drive (docs, vids, etc) which, of course, I hadn’t backed up for weeks.
Blah blah blah… out to buy a new HD and Win7 OEM 64-bit. Installing…pick the destination drive and a “can not install, check the Setup log” message. Doesn’t say –what– went wrong, just “no”.
Had to go to installing Vista just to get its less-generic “can’t find a System Volume” error.
Here’s the bottom line: Remove ALL USB drives before installing Win7. Introduce them later.
I think format new hard drive is the better way more than other method, none worry about the issue at later!