I think you can only upgrade SX versions pre version 3 to the equivalent package in the latest version which as far as I know means your only option is Cubase 5. You can't upgrade to Cubase Essential 4 because it is a streamlined package and therefore equivalent to the SE packages.
I'm not at all familiar with SX v1 but if there is a chance you can upgrade to Essentials 4, then I would imagine you would find yourself in a situation where you will gain useful features but lose out on some important features. I'm not sure what SX1's features are but here you can find a feature comparison chart which compares SX3 with other versions which should help you: http://www.steinbergusers.com/cubase/compchart2.php
