Howdy Cameronian,
Sorry to hear about the Acer not getting you very far.
then I wouldn't lose everything on my HDD and have to start again from the very beginning, which I believe would be necessary if I completely reinstalled XP.
Depends what you're after keeping. If you just want the user data then there are ways and means to back that up. But if you want all the software to be there, then it would be a case of reinstalling (or imaging, but not sure that would be advisable in your case given the state of the source image). Personally I wouldn't view it as such a bad thing, a fresh start could be the cloud with a silver lining.
In addition I don't really want issues with WGA.
I believe the Indians are generally pretty relaxed and helpful, but then I haven't had much direct experience of WGA "issues" because the only times I've had to re-install Windows on computers myself it has been with the use of one form or another of volume licensing key or retail boxed copies, which are a different kettle of fish.
Mike-Bracknell has more direct experience spending hours of his life helping home users, so he'll probably be the man to ask about WGA "issues".