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"But can I go from Win7 -> Win8 -> Win8.1 and the end result would be a windows 8.1 with all programs and files from the original windows 7 machine" - exactly. I did that with most computers of our domain - no problem at all, files, settings and applications were kept.
Windows 7 is an operating system from Microsoft. Features include multi-touch support, a redesigned Windows Shell with a new taskbar, referred to as the Superbar, a home networking system called HomeGroup, and performance improvements.
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You will need to go from Win7 -> Win8 -> Win8.1
In place upgrade from Win7 to Win8.1 only keeps files, you would need to reinstall all your applications and reconfigure all of your settings