You can legally use your CD key to run XP on one computer on any given time. So if you wiped the old computer, you can install it on the new PC legally without issue. You can use the automatic activation a couple of times even with major hardware changes (5 times I think). After that you have to do the phone process which is time consuming but easy.
The activation key is generated using a one-way hash of serial number from various pieces of hardware. There is no way to reverse the process and get the serial numbers back out of the activation key.
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