For optimizing Windows 7 Starter, you can start by disabling startup programs and services that aren't essential. Access 'msconfig' through the Run dialog (press Win+R) to manage these settings. Additionally, consider increasing your RAM if possible, as 32-bit systems can support up to 4GB.
Upgrading to a more recent Windows version like Windows 10 or 11 could definitely improve performance, but you'll need to ensure your hardware is compatible. Check the minimum system requirements for the new OS and compare them with your current hardware specifications. For software transition, most applications that work on Windows 7 should be compatible with newer versions, but it's wise to check compatibility for any critical software you use regularly. Remember to back up all necessary data before upgrading!