You can upgrade to XP, but I wouldn't recommend it. You can buy an OEM version of XP home for a pretty good price. You just have to purchase it with a piece of "computer hardware".
Here is an example at newegg.com for $91
To satisfy the OEM hardware requirement, newegg gives you a free computer cable (listed at the bottom of the page as "customer appreciation gift").
CPU - P4 2.4C, 800FSB W/HT - CONSERVATIVELY OC\'ED
MOBO - GIGABYTE GA-8KNXP 2.0 875P CHIPSET/DUAL BIOS VER. FE
RAM - 1GB (2X512) OCZ PC3200 REV 2, 400MHZ 2-3-3 6
VID CARD - ASUS RADEON 9600XT 128MB W/VIVO
FLOPPY - SAMSUNG 1.44M
HDD - MAXTOR 120GB 7200RPM ATA133 EIDE W/8MB BUFFER
DVD - LG GDR8162B 16X IDE DVD ROM
PSU - ENERMAX EG465P-VE FC 460 WATT
VANTEC VP4-C7040 AEROFLOW HS/FAN
5 X VANTEC STEALTH 80MM CASE FANS