What did you do to it?
I've been using Windows 7 Ultimate for longer than you've had the laptop. My laptop is now 3+ years old (had Vista on it for a while). Still working quite well, no crashes or hangs (though if it does either, I know exactly what caused it).
Now I wouldn't look back twice at XP, despite it being a stolid OS some time ago for many, many years.
Are you sure you have no malware / rootkits / extraneous software or services running? The fact that your system runs slower than Pacific Island parliament usually points to these factors. AVG may help you overcome some of these, but certainly not all of them, and in some cases you may need to actually have a look at your software environment critically and do some slashing and burning. I've seen some pretty sluggish systems before with the usual culprits as I've mentioned, though none as slow as you've reported (I'm surprised you had the patience to wait for the boot process to finish!)
There's always the "ultimate solution" - backup then reformat. At least in this case you can definitely check whether there is a serious hardware fault or not. In saying that, it does surprise me these days what kind of cheap systems retailers will wheel out to the public which probably barely meet the software requirements for the OS let alone to do anything else (and let's not get into the systems that sell with Windows 7 Starter *shudder*).
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