Hi beau,
This is really a totally different question and should have a separate thread, but as this is your thread and the original issue is resolved (if I read your post correctly), we'll just go ahead and deal with it here.
No, you can't upgrade for free - for some machines purchased when it was first released and had XP on them, that was true, but that is long and gone (it's long gone for Vista to W7 already as well). You need to
pay for the upgrade and get a Vista upgrade disk (though you can use a full installation disk to do it although it will cost more money - but be easier to re-install if that ever becomes necessary since with the upgrade you first need to install and activate the original operating system before you can install and activate the update). Furthermore, you can't use an OEM disk from a different machine to do an installation on any other machine (upgrade or otherwise) as it is good ONLY for the machine on which it was originally installed - yes it may seem to work (some OEM disks do, and others don't), but the product key will not be valid and will not allow activation (even manually) and in 30 days it will go into reduced mode where you can essentially do nothing but activate.
However, you may be able to avoid a complete re-installation if you can find somewhere to purchase a valid Vista basic upgrade product key or a Vista basic full installation product key (that will activate what you did) - but in all honesty that's going to be VERY difficult since I know of no place that sells the product let alone the product key (I know that Microsoft does not any more). I've looked before and found only OEM disks for sale (which may or may not work even assuming they are valid and haven't already been used despite what the offer says). If it is a valid, unused OEM disk (which is almost certainly to be a full install and not an upgrade disk - but that's OK IF that disk allows upgrades) then I believe the product key may work though you will almost certainly need to do it manually. If you go this route, get the details about the disk and then I suggest you call the Microsoft activation center and verify with them that it will work before spending your money.
To contact the activation center, go to Start, Search Box and type slui 4 and enter. Choose your country and it will give you a phone number. Wade through the prompts until you reach a human and discuss the issue and see what they say - then you can confirm it will work.
If you decide to return to XP, it's not as simple as "uninstalling" Vista. You need to re-install XP. Here's an article on the procedure:
How to go back to Windows XP after you have upgraded a Windows XP-based computer to Windows Vista.
I hope this helps and that you are lucky enough to find a Vista Basic product key (or product) to use.
Good luck!