OEM versions of Microsoft Operating Systems, (OS), are what you get if you purchase a PC, either from a computer shop or directly from a manufacturer like Dell, and it has the OS already installed. You usually get some free programs and some trial period programs, typically McAfee or Norton's firewall and anti-virus suites.
OEM systems are usually "locked" into the computer hardware and software configuration you have obtained. This means you cannot transfer the OS to another computer. Manufacturers and shops rarely supply the original OS CD's now, but instead create backup partitions on the hard disk in case you have to re-install the operating system. However if you insist, (and everyone should), they will supply the OS CD's, but often for a small fee.
With OEM systems your contract is with the shop/manufacturer, and not with Microsoft. So any problems with the system, hardware or software related, it is up to you to contact the supplier. Microsoft will turn away any requests for support and tell you to contact the supplier.
OEM CD's can be obtained on their own, but the legality of such purchases is often questioned. This is because the OEM OS needs to be supplied with "hardware". So you could, in theory, purchase a computer lead, say, and the OEM CD, and the legality is solved. However, purchasing the OEM CD itself means you have no support, either from a retailer/manufacturer, or from Microsoft. You're on your own. Some, (but not all), OEM disks purchased on their own will be pirate copies and eventually you will run across problems with validation and activation.
You're right that XP Home without SP2 will not recognise a hard disk's capacity greater than 137GB's, but all new XP CD's will come shipped with SP2 already incorporated. Personally I would go with XP Pro. But as you are a student, you may be able to get a student discount on XP. I'm not sure if that would be XP Home or XP Pro.
Googling "Windows XP - Student discounts", I found this;
offering Windows XP Pro as an upgrade at $79.99
If you still have the Windows 98 setup CD, it would be easy enough to upgrade to XP Pro, even by installing on a new hard disk. You just insert the 98 CD when required to prove it is an upgrade.
I hope this helps.
Hey guys I need help in making a good purchase decision.
I'm running windows 98 SE, and I plan on installing a new 160GB Hard drive with a new copy of Windows XP home edition full edition and not the upgrade edition. I'm a college student and looking for a good deal online, but I don't know what Microsoft's XP Home OEM is. Should I purchases the cheaper OEM version or the full retail one? Also I've read on the forums that I need XP SP2 edition to fully recognize the 160GB hard drive, any further tips appreciated. Thanks