Since XP has been running fine for nearly a year, and reading your original descriptions of the symptoms again, I have to suspect a virus. I may be wrong, but Microsoft allow 30 days for validation and if you've gone well past that before problems occurred, something has changed.

If I'm right, any attempt to validate this installation may run into the same problems. If you have an installation disk I would re-install XP - allow a full day for the job by the time you get it updated and other software installed. Validate immediately after the initial installation, before attempting any updates.

If you don't have an installation disk, you may still be able to create one from the recovery partition on the laptop, although you won't have any way of verifying it before you wipe the existing installation (unless you have a spare machine to try it on).

Failing all else, try the Product Key from the older XP machine. Any valid Product Key can validate any copy of XP, although you may still have the problem of Microsoft identifying the key as belonging to another machine (if that's a genuine notification). I would definitely use the phone validation - I suspect it doesn't check as much as on-line validation.

I have managed (purely for test purposes) to install & validate the same copy of XP on 3 physical & 2 virtual machines at the same time. Only one of these copies is still running - in case MS is listening!

Phil