The OEM copy of Windows included by Dell is locked to the specific computer, regardless of whether it's still in use on that computer or not. Thus, technically and legally the project is dead on arrival. However, if you're in the market for a cheap operating system have you considered free Linux distros such as Ubunut?
This came with my Dimension 2400 desktop 3 years ago which of course I updated to SP2. I was wondering if it could be used as the operating system for another laptop without one (maybe Dell or Toshiba) for my second computer and still be recognized for all the Microsoft updates. Someday my Fujitsu 655 TX hard drive will use up all of its rotations!