Any time you switch bit-size it requires a complete reinstall. So in order to upgrade for free you will most likely need to completely reinstall W7 32-bit with your current product key (which means backing up all your data, finding 32-bit drivers for all your hardware, and then reinstalling all your programs) and then upgrade; even then I do not know if it would qualify for the free upgrade (I'm not sure if install date is one of MS's qualifications to upgrade free)
Unless you have less than 3GB of RAM or you have old 16-bit programs you need to run, there is rarely a good reason to go back to 32-bit