Right, it could just be a mismatch between the license sticker and the key that teh (ex)friend used.
Install this
Magical Jelly Bean Software - Magical Jelly Bean Keyfinder v1.5 then compare teh number it retrieves with the number on your sticker. If they are different, start backing up your stuff ready for a reinstall (it seems the Change broken key in XP is broken). TBH a re-install is "a good thing" as it will clear out a load of crap that accumulates over time. Its just a pain to do.
If they are teh same I would give MS a call and explain that you bought this PC, it has a genuine (Or appears to you to be genuine) sticker but teh number is being flagged as dodgy.
The above are the legal ways of sorting teh problem. If you don't you get a 'very restricted' set of updates from Microdsoft and as you found 'other' stuff won't work. There are iffy ways round this that confuse the genuine advantage tool but as said, these are dodgy and therefore (as I always say) not up for discussion by me on a public forum.