reloading windows over an existing copy

Hi guys I will try to keep this as short as possible but here is the scenario.
My father in law purchased a second hand pc from a second hand/pawn broker, several months ago, when he got it home it had what appeared to him a fresh copy of xp pro on it (my words not his) (his words, he turned it on and it worked) over that time he has put a number of different programmes on it for different jobs that he does, all of which are obscure software packages for specific purposes. One of which is for one of the clubs he is a member of and a guy had to fly down and install it for him.
He has just noticed that the automatic update feature was not turned on and he has not done a manual update previous (not to tech savvy my father in law) when he did the update it came back with NOT GENUINE LICENCE or words to that effect. After seeing what he paid for it that doesn't come as a big surprise to myself. Now he has asked me to fix this problem for him and as there is no way to go back to the retailer the easy answer is to just purchase a new copy and install and move on with our day, the question I pose can you install a copy of xp home over the top of xp pro leaving all the files and programmes intact, I know you can going from xp pro to xp pro as I have done that myself when a mate of mine corupted his operating system and urgently needed to gain access to some of his programmes, but am curious if you can downgrade your operating system, the only other alternative I can think of if it is not possible is for him to splash out on a new xp pro key. But I would like to save him the dollars if poss.

Any advice is greatly appreciated
P.S as I mentioned before there is no way to track back the originally seller as I have already tried this as I was hoping to make them pay for it.

You dont need to install a fresh version. From my understanding, all you need is an authentic CD key. If you go nad pickup a copy of XP Pro, you wont necissarily need to reinstall Windows, rather just call Microsoft, report the situation, and give them the new CD key to do their thing with and get you rolling.

Note: I havent used Windows since this who activation stuff began, so dont take my answer to heart.

Thanks Evnas, Yep I knew that Im just hoping to save him some money and go home though getting a pro key would be faster

Let me see if I have this straight...

You want to install XPhome over an exissting XPpro installation. I don't think this will work. The reason I don't is that normally this type of install is looked at through Windows as an upgrade install. GOing from pro to home would not be an upgrade. I can honestly say that I have never tried going this root though, only the same as you; home to pro.

Is there a Windows license sticker on the side of the case? If there is, what version of Windows is it for? If it is for an OEM version of XP, you may be able to get out of this a little cheaper by obtaining a legit oem install disk. Also, if it is an XP sticker on the side, you may want to look into THIS. Seeing as how you are trying to do this so that you are in complience with Windows licensing, you may also want to give Microsoft a call. I've been told that they can be quite helpfull to people trying to be "legit". I've also heard of people copies of XP being mistakenly picked up as not valid when they indeed were (again I haven't come across this yet myself), this is another reason that it may be a good idea to place the call.

Thanks snafumaster
There is no sticker on the case, It looks to me as it may be a VLK and as he paid only a little bit more than half of what an oem copy of pro costs for his whole box I would say its a rip. I just want to get him legit for as little as I can, and XP home would do for him.

So does any one else have ideas how I could keep the files and programmes intact if he goes xp home or is a pro key the only way ??
any suggestions are appreciated