This all has a lot to do with the media...is this the orignal media that came with this computer? Allow me to elaborate a bit more. You simply cant have an XP Pro CD-KEY and ANY XP Pro CD and have it work...There are many variences of XP Pro from OEM, Retail,Microsoft, Vendors, Volume License Editions, Enterprise Editions etc etc...
So say I gave you my XP PRO CD which is a Volume License version and you typed your CD-KEY in while launching the install from my CD it will not accept it because it is not a Volume License CD-KEY, but most likely OEM or Retail.
What type of computer is this a Dell or something or custom built?