I had Vista on my desktop. 2 gigs RAM and it was still slow. I was so disappointed with it that I decided to completely reformat my entire drive and reinstall XP. Fortunately I had everything backed up on an external hard drive.
Fortunately I did it before I even used the computer. It was a low-end machine. Something just to go mobile, check e-mail on campus, that sort of thing.
In terms of everything transferring, I prefer to transfer files manually. It takes a little more time, in terms of gathering the files and making sure they are all backed up, but I have found that it is more efficient that using backup utilities. For programs, I usually make a list of the ones I want to reinstall, then I make sure I can get the discs or files to do so. And don't forget your internet browser's bookmarks/favorites and your e-mail client's saved e-mails. Those are the two that really catch up to people later on.