You can purchase an OS anywhere you like as they are all going to have around the same price. I suggest you pick up Windows 7 Home Premium as the AMD Neo line of processors (along with the ATI HD3200 integrated graphics) run that just fine without a hick up. Spring for the 32-bit edition as your Asus is capable of running up to 2GB of RAM. There is absolutely no need for you to get the 64-bit edition as your Asus cannot use 4GB of RAM, its limit is 2GB. Programs are still being released in 32-bit environments and that won't change for a really long time (at least another 4 years).
You will need to purchase the full version of Windows 7 Home Premium though, the upgrade disc won't cut it as your Asus does not come with a previously installed version of Windows. The full version of Windows 7 is going to cost you quite a bit. Amazon is selling the full version of $150. However, they are offering the 64-bit OEM edition for $100.
So I take back what I said previously, go ahead and get the 64-bit OEM edition if it comes out less than the full version. That $50 difference is more than enough to warrant you getting the 64-bit version despite the fact that you will never be using more than 2GB of RAM.
I am not sure if you are a college student or not but you can also pick up Windows 7 Professional from Microsoft's student store for a rather decent price. I would even check to see if your university participates in Microsoft's MSDN program as Windows 7 Pro can be found for extremely cheap prices through that. The prices are extremely good as they are free. I can download either the 32-bit or 64-bit version of Windows 7 Pro for free through NMSU's and UC's Microsoft MSDN websites, they also both charge $20 if I want the DVD mailed to me.
You don't necessarily need a DVD drive when installing Windows 7. Though that would be the easiest method, it also requires that you spend at least another $50 for a decent external DVD drive. There are plenty of free tutorials explaining how you can take the content on a Windows 7 DVD (or even a Windows 7 downloaded ISO file), put it on a thumb drive (with at least 4GB of storage), and boot from the thumb drive (using your computer) to go through the Windows 7 installation process. It took me about 3 minutes to take my Windows 7 Ultimate DVD, put it on a thumb drive, and then make the thumb drive bootable. You have to be the judge if 3 minutes of your time is worth spending an extra $50 or not.
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