Correct AJL, they have scrapped the idea on the limited execution version of Windows 7. However that wasn't the version for netbooks that would have supposedly done that. It was the version they were trying to build for legacy hardware in developing third world countries. However, like was said, this plan was scrapped, as it took more time and effort to implement the restriction than it would to just not have it (plus, yes, public outcry). As far as netbook variant os Windows 7, _normal_ Windows 7 installs and runs just fine. The only things you need to watch are the size (don't install media center and some of the fancy consumerist stuff) and HDD grinding things (only applies to SSDs, as repeated write/rewrite/rewrite/rewrite/etc will kill those over time). Superfetch and indexing improvements have been massively streamlined and work even on very limited hardware. There was a post just recently about getting Windows 7 to be usable on a Pentium 2 266Mhz, with 96MB of RAM (they couldn't drop it to 64MB without it failing to load up fully). That is a massive feat right there, and while it required massive tuning, you would have to do the same to Windows 2000 even to get it usable on that level of hardware. I suggest giving the Windows 7 Release Candidate a try. It is free, and will only cost you the download and some time (and maybe a DVD-R to burn it to). You can get it from Microsoft over here: Windows 7 RC | Support, Deployment, Resources
I have it running on an older bit of hardware right now as a file server that also does media streaming to the PS3 in the TV room. I also have it running on my old laptop (about 8 years old) also. It runs pretty well, and moves just as swiftly (and in some cases faster) than Windows XP did on it. Microsoft saw what went wrong with Vista, and decided to not only try to fix it, but improve even past that.
If you are comfortable with your build and dont need to change, then don't. You will be fine for a while to come. However, if you need to use more current software, or have some newer technology (SATA or solid state drives for instance) Windows 7 will be easier to install and get running than Windows XP.