You can get OEM XP Home for £55 and Pro for £90 - both up to date with SP2. Not sure about updating the licence key - had a similar problem with an installed version of Office 2003 Educational edition and then bought the full version, asked MS and they said I could not just 'swap' licence keys - had to unistall and reinstall the same software using the new key. I'll PM you with a link to the retailer so as not to be advertising.
Having said all that, are you sure it is dodgy software? Maybe just not having SP2 is preventing you updating.