Uh, that is not an upgrade. An upgrade is where you can pop in the disc and it will convert your operating system to the new one without having to reinstall anything.
What you described (and what miscrosoft is explaining to you) is a fresh install of a blank operating system and you have to reinstall all your programs and restore your files.
You can only upgrade do a true upgrade from Vista to Windows 7, not XP to windows 7.
Let's see. You drive a Ford, you drink crap beer, you quote Hitler, and you haven't had sex in years. Nope, ain't taking your advice. - BALIFF