I am in the process of replacing my old HP desktop with a new unit. My current desktop is operating with Windows XP Home Edition, Version 2002 Service Pack 3. I'm not sure it is a 32 bit or 64 bit but I assume being a 2002 model it is probably a 32 bit. If I buy a new PC with Windows 7, will I be able to transfer everything over from my current PC to the new PC without any problem?

Depends on what you define as everything. You can check the Windows compatibility listings on Microsoft's site to determine if there is any software that won't run under Win 7.

All your data files should transfer over.

Yes, generally you will. There's a compatibility mode on win7 that you can run other windows software.

Aparently Micosoft has some sort of free transfer agent

You also may have to upgrade to Win 7 professional to run XP based programs.

XP programs that directly access the hardware probably will not run.