1. Ideally you should install the 64bit version of all your programs, or use Windows 7 compatibility mode on ones that don't have 64bit option
The Enterprise, Ultimate and Professional versions of 64 bit Windows 7 also support a 32 bit Windows XP virtual machine, which is available as optional download. Your PC must support hardware level virtualisation to use this facility
2. No you are best to backup your data to external media first
Then install Windows 64bit clean, and then return the backed up data
3. I think your XP partition will be hidden. Therefore back as per "2" above
4. Yes
Although I would suggest to clean install Windows 7 (as you only have 40Gig left on the drive), you can use Gparted to help create a new partition for Windows 7 64Bit, from a Windows XP only machine
Here's a guide that may help you in doing that:
How to dual boot Windows XP and Windows 7 (XP installed first)