It came with win7 home premium installed with GRUB loader.
This doesn't make sense. GRUB loader is used with Linux OS installations. Does your laptop have a Linux OS (Ubuntu, Mint, Fedora, etc.) installed? If not, then there's no reason for GRUB to be present.
1.) No recovery disc or installation disc of my orgina OS..
This also does not make sense. Surely, Acer laptops have a recovery partition on the hard drive, which virtually all laptops now have. Typically, it will be on drive, i.e. partition, D. And, the user should be able to create a recovery disc on DVD from the recovery partition on the hard drive.
2. A Hard drive used by Vista or Windows 7 has to have the MBR be reset to be used by Windows XP.
If he does a clean install of Win XP, the installation process is going to erase the hard drive and create the MBR for Win XP. No need to "reset" it.