I need to convert a program that runs on XP to run on Windows 7

You haven't provided much information. The name and possibly the version of the program in question would have helped. Your flavour of Windows (e.g. Home vs. Pro/Ultimate and 32 bit vs. 64 bit) would be an added bonus.

If your program or its installation application is a 16 bit based program and you have a 64 bit version of Windows it simply will not run natively, regardless of compatiblity settings. You will need to run and install Virtual PC in XP Mode to have any chance of a fully operational 16 bit subsystem. If you are running Windows 7 Professional or Ultimate, you can use Windows XP Mode and Virtual PC without a second Windows license.

Windows Virtual PC
http://www.microsoft.com/windows/virtual-pc/download.aspx

Note: you cannot run XP Mode on Windows Home editions. If you are using Windows 7 Home Premium or somesuch, you would need to use DosBox or any other 3rd party virtualization program that works with Home Premium. Please visit forums dedicated to these programs for more information.

DosBox
http://www.dosbox.com/

More information at,

64-bit versions of Windows do not support 16-bit components, 16-bit processes, or 16-bit applications
http://support.microsoft.com/kb/896458

• "Have you tried turning it off and then on again?" - Roy from 'The IT Crowd' (Emmy award-winning British comedy)

You can't convert the program.  You may be able to upgrade...

OR

If the program is not compatible, then you may try to install and run the program in compatibility mode.

Use the following steps:

1.  Right click on the Program

2.  Click on Properties

3.  Click on Compatibility tab

4.  Select Run this Program in Compatibility Mode and select the Windows operating system where the program was running successfully.

OR

http://www.microsoft.com/windows/virtual-pc/  (Not available for Windows Home or Windows Starter)

 
If the Compatibility Mode is not successful, then try and run the Program Compatibility troubleshooter…  Open the Program Compatibility Troubleshooter by clicking the Start button.