You gave no clue of the XP PC you have. It may not be capable of Win 7 install if it doesn't meet the requirements. This is a h/w issue I'm explaining here. Goto MS download website and locate the Win 7 adviser pgm. to check the ability of your old XP system can be capable of installing Win 7 or what it needs to be fully capable otherwise, you're stuck not having the capability to upgrade fully. Also, it seems the XP version of the OS you have is capable of being used on another PC as it appears to be "retail version" and thus more flexible as being used for another PC install using the key. So, you better be capable once that key gets used, you used your 1-legal instance of the upgrade as I understand it. Have you tried online sources for XP discs or any "restore/recover disc" for your model# PC. It maybe possible and cheaper than you think, if you try all other methods then think of the time spend circumventing it otherwise and/or false leads or improper installs wrongly done. Alas, USB installs aren't supported under XP and usually if so done are too complicated or hassle prone.
tada -----Willy 