Hi JK,
Someone will correct me if this is wrong, but I don't think you can upgrade from XP to Windows 7 without doing a 'clean' install, unlike upgrading from Vista, which you can do without losing your data.
Further, I believe it's one licence, one machine, so unless you have two separate licenses for Vista and Windows 7, then I think you will only be able to use the Windows 7 disc to upgrade the existing Vista installation.