kevy,
I can see where your tech is coming from as it is very common practice to do that. I can also see the reasoning because you have 2 valid product keys. It's the same OS. One hard drive crashed, and you're missing the install disk for that hard drive. It seems very reasonable to me that you should be able to use your retail version of XP Home on that new hard drive because you have the product key from the laptop. I personally think, this should be an exception to the rule, in this case as well. Anyone reading what you wrote would take notice that you're in no way trying to pirate the software. However, I'm not a legal advisor so I can't say one way or the other on the legalities of it.
Take a read of this and then maybe it will help you decide more on what you want to do. It's a page that translates the EULA for XP Home "Retail" version more into "Plain English". :
http://www.militantplatypus.com/blog/lists...n-plain-english(There's a difference in the licensing between Retail and OEM, mainly Microsoft provides no support for OEM installs and once the computer dies, the software is supposed to go with it.)
If you're looking for XP, you can get it at good price from
PriceGrabber. (OEM < $100)
I've ordered from VioSoftware (on pricegrabber page) many times and have had great service from them. If you're in Australia, however, I'm not sure they ship there. Maybe a different store on PriceGrabber does.
Good luck with what you do and hope you find the least expensive route that makes YOU comfortable!