yes WINDOWS 7 go to control panel>system>change settings>computer name>hit change at the bottom and make a workgroup name. XP go to control panel>system>change settings>computer...
The simple answer is both are based on similar code base, but one is made for business (W2k), and the other for main stream (XP). Windows XP SP2 AND WINDOWS 2000 SP4 are the standard minimum versions...
Yes you can. XP is the next updated OP after ME, or Windows 2000. Youll have to update some things using the windows updater, but windows XP should upgrade easy and clean.