(Updates for your Windows Store apps are handled in the Store.
Even then, your existing hardware may or may not be sufficient for Windows 7, and you would need to buy a new PC.
If buying a new computer anyway, a Mac should be considered, as it generally is a more stable and user-friendly operating system compared to Windows, and their hardware is worth the price (internal serge-protector, web-cam, monitor, and general long-lasting).
Participating in the Check for updates but let me choose whether to download and install them: With this option, Windows Update will check for and notify you of available updates but you'll need to manually approve the download and installation of them.
Never check for updates (not recommended): This option disables Windows Update completely in Windows 8, 7, or Vista.
Consider the effects on your system carefully before setting these options.
For more information, see View or Change Server Properties (SQL Server).
However, Windows XP should serve you well for a while longer still, and Windows 7 may very well be a good choice.
If you think you would like a newer operating system, you should also consider Linux.
By the time Windows 7 comes out, Windows XP will probably be too outdated and, assuming Windows 7 has good performance and features, it would be a good upgrade.
At the moment, Windows 7 is in Alpha stage and it will be another couple years, give or take, before you will be able to install it.
Notify to schedule restart: Choose this option to automatically download updates of all kind—security, and non-security.