In my experience from working with crappy proprietary software pre-installed on laptops (all I did at my old job was clean that crap off people's computers) is that it's easier to download an image of a Win7 CD (retail: not illegal; you own a license) and install it on your computer. I have never had a problem using an OEM cd key on a retail disc; they are fundamentally the same. OEM discs and retail discs are the same, just one is supported by the manufacturer.
So, some simplified steps:
- Download a copy of your version of the Win7 install disc (if your key is for Professional, download Professional etc.)
- Install that copy of Win7 on your computer overwriting the existing Win7 install (you may delete the recovery partition if you wish, and some do, but I recommend against doing so unless you really need the space; it can come in handy later)
- Activate Win7 using the CD-key on the bottom of the computer (or in the manual or wherever the Certificate of Authenticity is)
(sometimes Microsoft will tell you to call a centre in your region to activate over the phone; this is normal once the license has already been used. Just repetitively assure the computer that you're only installing it on ONE machine and you'll be fine).
Hope this helps!
EDIT: After reading over more carefully, you want to make sure you're downloading the exact same version of Windows 7 that was installed on your computer. For example, WXPVOL_EN.iso (the disc name for XP Pro) is different than VRMPVOL_EN.iso (also for XP pro). This can take a bit of work, but it should activate no matter what. I'll bet if you call the activation centre in your country they'll let you install it. They always did for me.