1 and 2. If you need to buy, Windows 7 is better. I tried a Win 7 Ultimate version on a P4 2.2GHz CPU with 1.25GB memory. I was so impressive of its performance. Because it is new, I am still monitoring its performance but at least it is better than Vista. Windows XP still has a lot of bug, I will suggest you to try Win 7.
3. Depends on what function you need. Come here
http://windows.microsoft.com/en-us/windows7/products/compare to see the comparison.
If you need BitLocker function, you can go for Ultimate. BitLocker can encrypt your entire harddrive, this is good for laptop. In case you lose your computer, you won't expose your data to someone else.