Also, I was under the impression that Windows 7 stole the best gaming OS from WinXP.. or at least came close enough that WinXP is not needed anymore. Anyone know more about that?
Yes certainly for a couple of reasons that are off the top of my head:
1) Microsoft stopped supporting directx for WinXP a while ago. I think the last version that it supports is DX9c. Win7 supports the latest pixel shader and directx versions (11+) Of course your video card also has to be compatible. But even moderately old video cards can support DX 10, which was initially released with Vista.
2) Win7 was highly optimized for parallel computing and CPU management. For example when you're running a full-screen game, win7 automatically detects this and gives it full CPU power. Winxp was not so good with CPU management (AV scans, background processes etc. take a little bit of juice sometimes). Of course optimization of your system is very important, but Win7 provides a bit more leeway for the joe schmoe who doesn't care to turn off his AV scan while playing crysis. Though the game does need to be optimized for parallel computing, win7 was designed with multi-core in mind, and can help a little bit with performance on dual-core and so forth machines.
In summary, I would say for 32-bit, single core processors, WinXP is still the best OS to use. Windows 7 is definitely the best option for 64-bit and dualcore+ machines. Win XP 64bit SUCKS sooo bad (I used it for a little while before switching back to 7). Vista is just crap all together, win7 is better than Vista in almost every way imaginable.