I did a upgrade in the past and if Xen7 is compatible with your hardware you simply update over your old install. The datastore will be re-detected. (if you have a datastore separated from the Xen OS).
The VM will ask to update the xentool after.
In your case you need a three step upgrade, see that chart;
Version Direct upgrade to XenServer 7.0?
XenServer 6.5.0 Yes
XenServer 6.2.0 Yes
XenServer 6.1.0 Yes
XenServer 6.0.2 Yes
XenServer 6.0 Yes
XenServer 5.6, 5.6 Feature Pack 1,
5.6 Service Pack 2
No. You must first upgrade to XenServer 6.2.0, and then to version 7.0
XenServer 5.5 No. You must first upgrade to XenServer 5.6 (or 5.6 Feature Pack 1, or
5.6 Service Pack 2), and then to 6.2.0, and finally to version 7.0.
XenServer 5.0.0 No. You must first upgrade to XenServer 5.5, then to 5.6 (or to 5.6
Feature Pack 1 or 5.6 Service Pack 2), then to 6.2.0, and finally to version
7.0
From ; http://docs.citrix.com/content/dam/docs/en-us/xenserver/xenserver-7-0/downloads/xenserver-7-0-installation-guide.pdf
Be sure to have good backup in case something happen.