I figured I will just re-install the OS using my old XP Home Edition disk with SP1 which is the same as what he has on the computer. The only difference is that he has SP3 which I cannot uninstall. This is probably why I can't do a re-install. Any ideas how I can get around this problem. If I could fix the desktop and screensaver, I would just leave it as is.
You could create a SP3 slipstream of XP Home + all updates pretty easily, so that upon install or repair install, its fully patched to the very last patch. The repair install off of this SP3 slipstream option is best if you have programs etc that you dont want to lose etc.
Otherwise for clean install, install XP Home SP1 and then perform service pack updates to SP3 for any picky programs that require XP SP2+ to function correctly.
For the fact that this computer wont be used online, the biggest concern would be for it to be SP2 minimum for certain software that require SP2 such as some games and drivers etc, mainly due to the .net framework updates that are part of it. So if going the clean install route, you might as well make it SP3.