install Windows XP from your installation medium (CD-ROM for example) apply the latest service pack (currently that's Service Pack 3) run Windows Update and apply all patches
Regarding patching/updating Windows: there is a nice solution if you have to do this for multiple computers and want to minimize your download time and volume. heise security, a website of a German magazine publisher, has a nice, free solution for packaging Windows Updates:
DIY Service Pack - Installing Windows updates without an internet connection
Looking for manageable Windows updates even without an internet connection? Our offline update 3.0 script collection downloads the entire body of updates for Windows 2000, XP or Server 2003 from Microsoft's servers in one fell swoop and then uses them to create patch packages on CD, DVD or USB stick. Those in turn allow you to update as many PCs as desired."
"You determine the final release by looking at the roadmap. It also links you to the service pack to download (SP3). Since you cannot buy it in stores anymore, you must copy someone else's disk. If the disk does not include SP3, you must go through a slipstreaming dance. Once you have this Win XP with SP3 disk you can use it to install on the intended machine provided you have an activation key. You can still buy activation keys by going through the Microsoft Genuine Advantage thing, or by calling them, if that's what you actually need. They're not all talk, they have an accounts receivable department.
If you are in college, inquire with you're college first. They might have paid the Microsoft tax as part of your tuition which entitles you to certain things, possibly a license to windows and office. Probably free versions of Visual Studio and other products.
Now, although most stores you walk into don't carry it anymore, you can get it online. Such as from NewEgg."