Windows 7: Is 32bit Win7 better than 64bit for most purposes?

This is just a personal opinion and others may very well disagree. But I think Windows 7 64-bit is better than 32-bit simply because of the ability to make better use of installed memory. A 32-bit machine is limited to 4GB minus whatever memory might be set aside for graphics, etc. Most folks see about 3 - 3.5GB of usable RAM on a 32-bit machine. If your machine is upgradeable (or came with) more than 4GB RAM then 64-bit is the way to go.

Memory - Set Maximum Amount Used by Windows 7

As far as using older legacy XP programs you could try running them in compatibility mode.

Compatibility Mode

Or, since you indicate you're using Ultimate, you also have the option to download the free Windows XP Mode which may let you have an even better experience.

Windows XP Mode - Windows 7 features - Microsoft Windows

Another vote for the recommendations from marsimar (us South Texans think alike).

64 bit is the only choice in my opinion.

Here's another link for you:
32-bit and 64-bit Windows: frequently asked questions

There is a performance hit when virtualizing, but it isn't as much as you'd think. I've also found that most apps that need to be virtualized are so old, the virtual machine still provides MUCH more power than the original systems that those games/apps would need. For example, a VM on my system is still a much faster compuer than the original StarCraft was every tested to run on...so it works fine.

Another reason: I think that Windows 7 is mostly installed in x64 variants. Thus software developers have optimized for that scenario.

If less than 4gb RAM I prefer 32 bit for better performance.

With 4gb RAM a 64-bit factory preinstall is noticeably faster with ordinary use after reinstalling 32 bit - however this can also be due to losing the bloatware.

There are uses where 64 bit makes a difference, but it would surely need more RAM to matter? I think making 4gb standard for OEM PC's preinstalled with 64 bit is a flaw and would upgrade RAM if I needed it for uses which function best with 64 bit like PhotoShop.

You'll also have some RAM apportioned to hardware. You can see how much on a bar graph by typing Resource Monitor in Start Search box, click on Memory tab.