Douglas Neiner,
Your plan is sound.
Most laptops are name-brand and most name-brand computers come with some sort of recovery CD/DVD or hidden recovery partition on the hard disk. Assuming that's your situation, this should be what you will use to cleanly install via a destructive recovery of the original XP Home back onto the laptop.
Since your XP Pro Upgrade is a retail license sold in a nice pretty box, once it is removed (by the process of doing a destructive recovery on the laptop) from the laptop it is now "freed-up" to be installed on another XP installation, or sold by you to someone else so that they can install it. The EULA does have a passage that tells you what you are required to give to the person to whom you sell it.
There is no Microsoft process that "de-activates" a given Product Key so that it is "freed-up" to be installed on a subsequent computer. The normal activation procedure has enough flexibility built in so that the Buyer of your XP Pro Upgrade will not have a problem installing or activating it.
It's a great idea to do a destructive recovery on a computer that you plan to sell, so that the chances of your personal information, which has accumulated on the computer over the course of time, being exposed to the next owner are greatly reduced.
