The key on the sticker attached to the bottom of the unit is uniquely tied to the original XP cd which was used to install the Operating System. When you enter the key it is compared with an encrypted key on the cd and if the two match the install proceeds as normal. If they do not match, as you found, several problems occur like not being able to download updates.
If you use a second XP cd and its correct key and that cd has already been used to install an operating system then the duplication will be found when Microsoft runs its authenticity check and the second OS will eventually be crippled.
Contact your local Microsoft office for advice, they may give you a special key to enter.
Good luck