You can't upgrade your WinXP machine for even $1000 as WinXP isn't an eligible product. All you can do is replace it by buying a whole new license, unless you can find a Win8 upgrade from somewhere.
MS has been close to giving Windows away to large OEMs for years and as that's how most people get Windows (buying it pre-installed on a brand name computer) so most people have been getting Windows for very little already. Regardless, they've already paid for it and MS makes no more money from them.
MS is giving Win10 away because it costs them very little to do so and the user becomes a potential customer for their app store. They definitely aren't going to make any money out of you as a continuing Win7 user. Both users cost a similar amount to support but only one offers potential sales. MS is also trying to establish a sustainable userbase for their app store.