I do not have and working experience with Windows Vista, but from what I understand from random comments and reveiws, XP is better if it can handle your system. I just upgraded my computer, and I stuck with windows XP. After 6 years and hundreds of updates, it seems to be a relatively sound program. Meanwhile, Vista seems to be where Windows XP was at it's beginning: a decent program overall, but full of minor flaws and program loopholes.

Of course, if you plan on a big system (involving more than 4MB of RAM), you must get Vista.

You didn't say what your motherboard is, but your graphics card is PCI-e, so I'd say it's new enough. Even though PCI-e v2.0 is out, v1 is still plenty to support new graphics cards. The rest just depends on what else you plan to change with your system (being able to support a new processor, having the right connections for a new case, etc.).