"Windows 7 downgradable to Windows XP" does NOT sound like "running in
XP mode" or using a virtual PC. Rather, it sounds more like what usually
is sold on a "business" computer to organizations that want a new
computer but don't want to switch to Windows 7 yet. I haven't paid close
attention, but I don't think this typically was offered on "consumer" PCs.
Basically, you have a Windows 7 capable computer (and the media to
install Windows 7), but Windows XP is the operating system installed on
it. See, for example,
http://oem.microsoft.com/script/contentpage.aspx?pageid=552836
If you (or your client) are now ready for Windows 7, you'll have to do a
"custom install" of Windows 7, which basically means that you'll have to
copy any data you want saved and re-install any applications after the
Windows 7 install is completed. See
http://windows.microsoft.com/en-US/windows7/help/upgrading-from-windows-xp-to-windows-7