In my opinion XP is better because it uses only very little ram(less than 150 mb)
compared to 600-750 mb of ram in windows 7.So games will get more resorses to work.
But some newer games work better in Windows 7
This thread is quite old so the whole discussion part is moot. W8 will be out in a few months and you can start the discussion again.
There are definitely some games that run better or even "need" settings of Vista or XP to work properly.
As for memory and CPU processing power, newer games of course tend to need/use more because they are designed to use the power of newer machines and hand-in-hand games needing more is one of the major driving forces for PC manufacturers to make more powerful machines.