Yea, that might be a problem.
Sounds like you have a bootleg copy. Is this a copy that came with a brand-name PC? (i.e. Dell, HP) Or did you buy it somewhere else?
I bought my XP Pro SP2 off eBay, but if you go on BizRate.com, you can find it for around $135. Most people would recommend Pro over Home Edition on the basis that it is more secure and has more networking functionality. Microsoft's site should have a comparison chart on their product listing that'll tell you exactly what the differences are.
I'd be careful on eBay - I got a bootleg copy of Windows 2000 that was supposed to be a legal copy - and it didn't work at all. Fortunately I got a refund, but it was a pain to have to go and get an OS all over again. Hope this helps.