I had some installation trouble, but my router is now running Mach3 on W7 on an older computer. You really need to make sure that the DVD you get is a 32 bit version; the normal retail or OEM DVD you find around is 64 bit. While you can run Mach on 512MB, W7 is a pig with that little memory, although 1G seems to be enough.
Newegg does have a 32 bit version OEM 1 pack for $99 with free shipping.
Did you ask the shop if they could sell you a licensed version of XP with the machine? They may be able to do that for less than $100.