Windows 7 is more graphics intensive than Windows XP, so I don't see how installing it on your laptop will improve the performance of the computer. Windows 7 will easily install onto your laptop, but I wouldn't expect to see any significant performance improvements.
According to
this, you just barely meet the requirements for the ram, although these specifications may be just recommended because Vista would work with only a half a gigabyte, and I've used the beta version of Win7 with only a half a Gigabyte.
I think the aero interface is what requires the extra half a gigabyte..
