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Windows 7 can be a pain when doing an upgrade installation and almost always causes problems with applications, I would always recommend doing a "clean installation" for the least troublesome setup. If you insist on attempting a Windows 7 Upgrade installation be sure that all of your applications are up to date before doing so, the main ones that can (and will) break if they are not up-to-date are Internet Explorer, Windows Mail, the User Interface change and compatibility with legacy applications.
Before you begin the upgrade, ensure that Internet Explorer is up-to-date and that all toolbars and plugins are disabled. For the best experiance it is always better to backup then nuke your OS and finally install Windows 7. Always ensure that you have a backup of your important documents before attempting an upgrade. To do a simple backup with free software see this link for the best: //www.brighthub.com/computing/smb-security/articles/47759.aspx
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The Windows Upgrade Adviser
Before attempting an upgrade it is always a good idea to run the Windows 7 Upgrade Adviser which a piece of software that will scan your computer for applications and settings which may cause problems when you attempt to upgrade to Windows 7. If your upgrade installation failed early on and you can still access your old operating system then it is a good idea to run the upgrade adviser to find potential problems then uninstall the applications.
If you cannot access your old Operating System you will have to perform a clean installation (if your Windows 7 disk allows it) or reinstall your old Operating System then attempt to upgrade.
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32bit and 64bit
You can use the upgrade option to upgrade to the same architecture, for example a 32bit Windows Vista to a 32bit Windows 7. It will save all of your programs, settings and files and allow you to use them when Windows 7 has completed the upgrade.
However something a lot of users seem to get confused with is the fact that you cannot upgrade from 64bit to 32bit or vice-versa, this requires a full installation and you will need to backup your files and use the "Custom" installation option which you can access by booting from the Windows disk.
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You cannot upgrade directly from Windows XP as a lot of users try to do, from here you have two options. The first is to upgrade to Windows Vista and then to Windows 7 but this is not advised as a lot of programs and drivers will break and instead Windows 7 provides a migration tool on its disk. The migration tool will copy all files, documents, settings and user accounts onto backup media (such as a DVD, external hard disk or remote server) but it will not copy your programs and drivers. You will need to reinstall these after Windows 7 is setup. (Reference: Microsoft Technet)
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In conclusion, an upgrade from Windows Vista to Windows 7 can cause problems if your programs are not up to date or you are trying to upgrade to another architecture. Before attempting an upgrade I would always advise you to use the Windows 7 Upgrade Adviser to highlight potential problems, following these steps should minimize problems which may arise.