Re: Which one to use?
Just like Mak said, the newer games are going to be made for Vista. That's because true DirectX 10 is Vista-only. Most new games will have DirectX 9 versions, too, but obviously the visuals will be better with 10. Your video card is DX10 capable.
I have heard that some older games do not work well or at all in Vista. So you have to decide whether you will be primarily playing new games or old ones. If I were you, I would just do XP now for free and upgrade to Vista whenever you are ready. Unless you just have money to spend.
And yes, you will be able to buy the upgrade version if you have XP installed. People always say that it's better to do a clean install, though. I did it with an XP upgrade CD; it just asked me to put my old CD in during installation to prove that I was eligible. But I don't know if you can do a clean install with a Vista upgrade or not.
About using your friend's CD. If the CD is the OEM CD that your friend got with his computer, it will work with your OEM key. But if your friend actually went out and bought the retail version, your OEM key won't work with it.