Hello Alex,
In order to receive the best support, we request all users initially download and run the Genuine Diagnostics tool (MGADiag.exe) at this link
http://go.microsoft.com/fwlink/?linkid=52012. Click "Continue", click the "Copy" button then “Paste” the report into a reply message in this thread.
If you are trying to use the Product Update Tool to change out a bad key for a good key and you are getting an error (for whatever reason) the only other option is to reinstall XP using the good key.
If you are unable to install XP because it won't accept the Product Key, create a (no cost) support request at
http://go.microsoft.com/fwlink/?linkid=52029 and they should be able to tell you if the key is good or not.
Thank you,
Darin MS