I can't say whether it will or won't, but you can pickup an upgrade copy for the same price. I know that upgrade copies do upgrade and "custom install", which is microsoft slang for "normal installation".
If you are running XP Pro 32 bit can you load win 7 64 thus getting the system to run at 64bit. It is odd that the fact that 32 bit version will only reas 3mb of ram is usually only discovered after you buy 8mb and find most of it is not usable. G
no once installed you will have to use windows update to update it which can take anything from 1-7 days depends om how frequently you check for updates you may also need to install java adobe reader/flashplayer/macromediaplayer/air for it to function correctly on the internet