Hi,
If you are asking for a recommendation then I would say go for Windows 7 as it is pretty impressive. I would actually go for the 64 bit version as it will allow you to access all of your memory and also allow for future memory expansion.
I am running the Ultimate version, because I need the Japanese Language interface but, to be honest, I don't believe it is actually worth the extra cost. I do not use Bit Locker and for general home use, I don't see why anybody would, it is more for business users really.
I too considered the Virtual XP side of things, before buying Windows 7 but again, I have not really found a need to use it, as all of my software and nearly all of my hardware runs in 7 without any problems.
If you can afford it, then I would say go for Windows 7.