how to make system recovery discs from system restore partion on HD

Hello,
My problem is a little headache at the moment.

The computer is a compaq with a partition for system restore, unfortunately the cd creator software from HP was never used when new to make the restore discs on cd.

-the reason being for problems, the computer either had a virus & hard disk drive problems, the f10 boot thing didnt work, so someone installed their copy of xp (unbootable). Now the oem licence key doesnt work, after telephoning MS they say the original is needed from the manufacturer, well it came on the HD and a copy was never made.
So now I have a compaq computer with unactivated xp and an "oem" license that wont work for it? which i am not sure why, as i understood we own a licence.
Hp can sell me the discs for $50 or actually £25 as im in the uk, but i cant see these definetely working if the licence key is not recognised any longer (computer was bought new and the licence worked before for 16 months).

So does anyone know - how to make system recovery discs from the system recovery partion on HD?
or any other way round to restoring the computer? there is 3gb of stuff on the partition to return it like new (but i cannot see it.) or how to utilize it
thanks
mr Bananas