If you can't afford the upgrade to win 7, then either go the phone route to activate the key you own or buy a Enterprise version of XP Pro for 40 bucks, that is what I pay for it. Personally I would spend the hundred bucks for win7 if you can do that.
To install the upgrade version which costs a hundred bucks, format the drive because Microsoft says you can't
upgrade winXP. Install it once like the above poster says without typing in the key, then just install over it adding the key this time. It is simple, I have done this in the past.
If you can't go for the above suggestions because of money constraints, download and use Win8 Developers edition until they shut it down. They give plenty of warning before they do, so don't worry about loosing data...plenty of time to back it up.http://msdn.microsoft.com/en-us/windows/apps/br229516
If this is an old system use the 32 bit version, if this is a newer system, two years old or less, use the 64 bit version. I say this because I tried the 64 bit on an old system and couldn't get drivers to run some of the hardware, where by installing the 32 bit version it had all the drivers I needed and is running fine...never ran this fast with XP. The only problem I ran into is I have to run the network diagnostic to connect to the internet when I turn it on in the morning....small price to pay for a free operating system I say. If you decide to go this route for now, you will want to get rid of the Metro GUI and go back to the Win7 style GUI, go here to learn how to change it:http://techblog.ginktage.com/2011/09/ho ... windows-8/