Hi Rog,
You certainly could upgrade to a later version but if you go with Windows 7, you would need the Professional, Ultimate or Enterprise editions, to install and use the XP Mode mentioned by Bill above.
The Song Manager supplied with the KN7000, program will not run on 'Bare' Windows 7 or Windows 8 (Euch! I hate Win8) neither will SD Jukebox.
Also, your current XP PC or laptop may not be suitable for installing and running these later OS versions. Nowadays, you will be lucky to find a PC or Laptop with Windows 7 installed - most have the dreaded Windows 8 installed
Why not just keep one of your XP PCs as a dedicated PC for your KN7000, but install the FREE AVG as your virus protection, if that is the only thing causing a problem.
I have Windows 7 on my main laptop, and I really like that OS, but I bought a small ACER 10 inch Netbook with XP installed and it is permanently connected via USB to my KN7000 and has wireless Internet access. It sits nicely on the music stand - since I have no other use for the stand