|"..the system has 1.5GB of RAM, not 3GB..."|
Oops. Even so, that may be more than adequate for your Dad's needs, unless he does use something that does benefit from more ram - e.g. if he likes to play recent or fairly recent games. Many people don't run anything that benefits from more than 512mb in XP; double that for Vista or Windows 7.
"Do you think the Athlon XP 2700 w/ 1.5GB will run Win 7 any faster than an old P3 runs XP?"
That's comparing apples to oranges, but I would think the XP 2700 system with Windows 7 would be faster. It would be noticably faster with XP however.
The Athlon XP cpus are two steps above P3s. When they came out with the XP cpus AMD felt it was no longer valid to merely compare the speed at which the cpu runs at, because the XP cpus were more efficient than the current P4s were at the time, so , e.g. 2700 is AMD's approximation of comparing it in overall peformance to the first generation of P4s running at 2.7ghz, despite the fact the speed the XP 2700 runs at is slower than that.
AMD is still doing that with their model names these days.
E.g. the 64 X2 6400+ runs at 3.2ghz