I'd definitely recommend using the upgrade program rather than Windows update
Failing that, the 'boot image to DVD/USB and install from that' option.
In the two VMs I updated (one with an architecture similar to a pentium 3 with a Core 2 Quad hanging off it (Xen's qemu-traditional), the other similar to a penryn Core 2 system (Q45 - qemu-xen), both using rombios rather than uefi) I upgraded a Windows 7 SP1 install (no patches beyond SP1) and it installed fine.
My Dad wasn't so lucky - his much more modern system (low end Core system) repeatedly blue screened, but at least it rolled back flawlessly.
Biting the hand that feeds IT
