Original Equipment Manufacturer (OEM) version of windows XP, pro or home are technically only to be supplied when you purchase hardware, hard disk, motherboard, etc. So technically you could have an issue with WGA, possibly not, but it is an expensive option if it doesn't work.
Upgrades must have a qualifying previous version of windows and that is meant to be a retail version. It doesn't have to be installed but you have to have the genuine CD that it came on available for validating.
You would be safer with a purchase of the Retail version, more costly but less likely to be a problem and it would also be a qualifying product in the future should you choose to get Vista, etc.
Before doing any of this I would contact MS or visit the WGA validation and there should be a link about getting a genuine copy. You may well be able to grass the supplier that sole the copy and possibly get a free license. If you do great, if not, nothing lost.
For an OEM explanation see the link on their own site
http://www.softwareoutlet.com/soldas.htm#oemcoa but I think they are dancing around the issue of if it has to be with a system or a hardware purchase.
The second one is the OEM products which are sold mainly to system builders, such as Compaq and Dell (the OEMs). These bulk-pack products do not have fancy packaging materials and are often produced in much higher volume, both of which result in much lower prices that have not been available to the public. The OEM products are of the same quality and often carry the same manufacturer warranty as their retail counterparts (the single-pack). They also often include supporting materials such as manuals and drivers when applicable. However, most of the information is on a CD or on manufacturer's web site.