Booting off another disk won'd do anything for you. If you saw Windows is Starting, that means you did not boot off the CD.
If you are not worried about loosing your data, boot off the disk you have, and try to do the setup. If the key does not work, worry about it then. If you want to keep your existing data, buy a new laptop hard drive (check your model first to make sure you get the right kind), then try using the disk. You may be able to find an OEM XP disk somewhere to use with your laptop if the code does not work. People post this type of stuff on craigslist or some other local want ad. You may also be able to contact the vendor for a resotre disk, they will probably chage you for it but will be cheaper than buying a new XP copy.