Heh, wow... I'm not having any problems but I wanted to chime in here cause I think I just did a similar thing...
The upstairs Dell came with Windows XP. The actual disc isn't labeled as recovery, it's labeled Windows XP, for distribution with only a Dell computer. There are separate CDs for the recovery portion of it. My Gateway came with Windows ME which is built into the recovery discs.
I put the recovery discs in, installed Windows ME, then put the Dell's copy of Windows XP in and installed it. I didn't have any problems besides the fact the SP2 attachment I downloaded off of the Windows site doesn't seem to work.
So, did I just do something illegal as the original poster did? If so, woops.
btw - If I'd buy a new version of XP, does it come with SP2 preloaded? There's something about these service packs I can't seem to DL properly.