I'm sure that you can. But you MUST DEACTIVATE CS3 on XP FIRST.
The other thing to watch out for is that CS3 may not function properly under Windows 7. However the workaround for that is to use Windows XP Mode within Windows 7 which is basically a virtual machine that allows Windows XP programs to run within Windows 7. You must CHECK your hardware specifications to see that XP Mode can run on your computer. It has to do with hyperthreading within the BIOS of your computer for beginners and there may be other considerations as well such as how much hard disk space you have available and the RAM of your computer. Do some research BEFORE you take the plunge and convert your CS3 installation over to Windows 7. In all actuality, if you can run XP Mode you won't need to have the Windows XP OS installed on your computer at all, in my opinion.
Also, is your Windows 7 a 32-bit or 64-bit OS? In actuality it is probably 32-bit which means that upgrading CS3 to CS5 and beyond will not make much sense on your hardware because CS5 is built to take advantage of 64-bit operating systems, especially as far as After Effects, Premiere Pro, and Photoshop are concerned, as well as Adobe Media Encoder.
Thanks for the insight, my Xp is 32 bit, and Window 7 is 64 Bit, I running dual xeons, socket 771. Now my concern is 32 bit XP into 64bit Win& ? ?
Thanks - hap