I would not go less than Home Premium.
Since you are migrating from XP you might consider getting Professional in case there is any older software you use that won't run in native W7; in which case you can likely run them in the free download from Microsoft called Virtual PC - XP mode (But, If you still have XP discs and license you can use other companies free Virtual PC environments, which don't require Professional or higher like Microsoft's)
If you use the Group policy editor, know that it is only available in Professional or Ultimate.
For some more comparisons of the versions check out
THIS.
You also need to consider 64 or 32-bit. If your new machine will have more than 3GB of memory then I would suggest 64-bit because 32-bit can only see a max of 3.25GB, but know that if you have any old 16-bit apps they will only run in a Virtual PC - XP environment under W7-64. In general if your machine can support it then I suggest 64 but try running the
W7 upgrade advisor on your current machine just to see if your software or extra hardware, like your printer, are W7 compatible in 32 or 64 (make sure everything is connected and turned on).