Let me make sure I did this right first.
I put the CD in, booted up with the CD, went to the first option that said Start up Windows XP, then it asked me to agree or disagree to a term of agreement and I hit agree and then it asks if I want to do a brand new install of Windows XP or just repair it so I see C://Windows and hit 'R' to repair. There's a loading bar and once it hit 100% the computer rebooted and I was able to finally get past the Windows XP loading bar to the Windows XP installation screen. The installation started right away without asking me if I wanted to install it or not and in about 10-15 minutes a windows pops up and I hit 'next' and it asks for my serial.
Also I did threaten to sue (and this was well over a year ago) but they claimed I had no proof but we compromised and he gave me an OEM copy of one of the computers at his store, telling me that while I can install updates and all that, I will not be able to reformat or reinstall Windows or else I would get the WGA warning again. I called into Microsoft and their support was pretty much useless as usual. They pretty much said "Hey you have an OEM copy so therefor we can't really help you."