I recommend 7.10, but I would definitely do a clean install 100% of the times I've tried "upgrading" it failed in some way and some aspect of the new OS was broken. I'd back up my data to CD's, DVD's, or a different HDD or partition and then wipe your Linux partition and install 7.10 from scratch...however, if 7.04 is "good enough for you", then it's only a few months (3 months) until 8.04, so if you don't mind the wait, you can hold off until then.