Upgrade to WIN7? Using half of my Q6600 Core2 in XP Home OS?

P-35 Platinum MS-7345 Mobo
Windows XP Home Edition SP3
Intel Core 2 Quad CPU Q6600 @ 2.40GHz (4 CPUs)
2.4 GHz, 3328 MB RAM
NVIDIA GeForce 8600GT 512 Memory Size
Realtek HD Audio Output Sound
DirectX version: 9.0c
Monitor: Viewsonic VX2035wm Series
WD 500 GB HDD / WD 74GB RAPTOR HDD
NERO 9
Pinnacle Studio 14 Ultimate HD
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Hello,
Not only can this 32 Bit (x86) XP HOME only recognize up to 3.3 memory...I have 4GB onboard, but I heard the other day that my Q6600 Core2 CPU can only utilize half the Quad power...is this true? Not good news.

So if I'm using a 32 Bit XP Home version, and want to utilize ALL of my quad CPU and Memory power, I can upgrade to Windows 7 64 Bit? I heard one or the other Windows versions can handle more memory.

I thought since my CPU is a 32BIT, I would have to go with a 32 BIT Windows OS??? or not really? All this seems to be a bit confusing. I do know when I wipe the HDD and re-install the Win7 upgrade, I will have to get all newer firmware or updated drivers all over again... Frustrating when I'm editing video in STUDIO, the program crashes , even though I free up valuable resources, like DEGRAG, Turn off Firewall, Anti-virus software, delete all Auxiliary files and temp files, and recycle bin, Log off the internet, end task running programs, just to be able to edit video per session.

In using exhaustive memory programs like Photoshop and Pinnacle Studio 14HD, I will definitely need more than my 3.3 Ram, maybe up to 8GB, also, but not necessarily a faster/newer Pci-E Gpu, and maybe upgrade my Q6600 CPU, (or maybe not.)

Also, I thought the 32BIT Win7 is unlimited on memory, but not to sure if motherboard can handle more than 8GB.

So given my stated computer specs, and what I want to accomplish, what would be the best case scenario for suggestions for me to upgrade to Win7? Thank you!

The Core2 Q6600 is a 64-bit processor. To clarify, any motherboard that supports a 64-bit processor will support 64-bit itself.

It's not XP that is limited to less than 4GB memory, it's the 32-bit OS that is limited. While the 64-bit OS can see more than 4GB memory, it still has a limit but the limit is much greater than 4GB.

Your motherboard will support up to 8GB - Quote from MSI P35 Platinum