As for poking your old HD into her box, yes, that might work if (1) it's the same interface, that is, you're not trying to plug a SATA drive into an IDE cable, and (2) you're willing to deal with the inevitable driver issues that represent the differences between the hardware on the two machines - video card is probably the most inevitable. It is relatively safe to plug it in and see what happens, you're not likely to ruin anything that isn't already ruined. You'd be wise to image your old HD to, say, a USB external (even a decent-sized thumb drive will work for a basic XP installation), using Ghost or something similar, before you start. Don't forget that her machine might be too old to do cable-select on the HD and you may have to jumper it into a Master state.
It's legal enough to transfer the OS license to new hardware but when it's time to register it with Microsoft you may have to give tech support a call to get it moved. I've done that and they're very helpful. As long as you have the original install code. Hope this helps.
The old (bad) box has what I assume is the original XP load key/serial number printed on a sticker, but there is no copy of the original media in an i386 folder.
So can I assume that swapping the hard drive into the new box will likely work if I can get past the problem of finding drivers for all the hardware devices and doing an install on ach of them?
BTW - my sincere thanks to everyone who has responded or will respond. Once again, Free Republic proves to be the best online community - bar none.