Well there's your problem - your Windows XP isn't legit.
Is my puter screwed if I don't buy a copy of XP?
Yep - you need to get your own legit copy.
There's ways around it but it requires a trip to Frys to turn over one of their laptops to get a valid code plus I think it's only one reghack. I suggest you buy it though.
You can also get the code from the web.