Confused between 32 bit OS and 64 bit OS

You must reinstall the machine to do 64 bit (which I think a move from XP to 7 requires anyways). Your processor must support 64 bit. All newer Intel and AMD chips do. If it's 3-4 years old and an AMD system, it almost certainly supports 64 bit. Intel was a little slower adding 64 bit support and may or may not support it. The only major advantage to 64 bit is the ability to use over 3.5GB of ram on a windows client operating system. Your 3-4 year old motherboard probably cannot support that much memory though. There's some extra registers in there as well, but for most applications, you won't notice any difference.

I would recommend sticking with 32 bit as there are still certain things that don't work with 64 bit (although that list is shortening every day) and your computer probably won't get any benefit performance wise.

the bitness is 100% dependant on the machine hardware (specifically, the processor has to be a 64-bit CPU).