You don't really need to loose anything. The fact that the product key for
your installation is blacklisted, doesn't mean very much in and of itself.
You will still receive critical updates and your computer will continue
working indefinitely and the Windows XP code itself might be A-OK genuine
anyway.
Now, even so, you probably want to rectify the "Genuine" business.
Backing up to CD-R may not be the way, nor even DVD-R (you say you have an
"extreme" amount of data). You are probably looking more at a USB external
harddrive. I got one, an iomega 160GB, for around $120 Cdn. Or if there's
another computer on a home/business network, you can copy the data to a
share on its harddrive.
You also might look into the Files and Settings Transfer Wizard. There are
options that enable you to pick and choose what gets backed up so you don't
have to duplicate what you may have backed up by other means. The FSTW
results can go onto removable media e.g. CD-R or onto a network share or
onto an external USB harddrive etc. etc.
Once you have copied over data and / or run the FSTW, you can gather
together all the stuff you need for an install. Numbers, configurations,
product keys, drivers (be sure to download and burn to CD-R any drivers you
might need for you computer - this is an opportunity to get the latest from
the manufacturers), and software media for third party apps.
Now I'm loathe to say go get a legitimate copy of Windows if you haven't
otherwise secured one from the where you bought your computer. Remember that
the person who sold you the computer has a difficult time of it. Microsoft
requires that COA stickers (with the Windows Product key) are openly
displayed! A pirate could have easily copied the number! Yet at the same
time buyers expect that the Window Product key is unique for them. The
seller is between a rock and a hard place. Anyway, if you get a new copy,
get a copy of Windows, say from newegg.com for a reasoable price -- OEM is
OK if you envision only using it on this computer -- and you are set to go.
If you know for sure you don't use the features of Pro, consider Home ed.,
it's much less pricey. Make sure it is at SP2 level.
If you decide, on the unlikely otherhand, to reuse the disc you already
have, check it to make sure it is a real Windows XP Pro hologram disc. Make
sure none of the holograms are "stick-ums", that the disc's intergrity is
A-OK. The real one is quite a sight and hard to duplicate:
http://www.microsoft.com/resources/howtotell/en/counterfeit.mspx
NOTE: If you haven't resolved the key issue, you might get the "not genuine"
issue all over again. So either resolve this or use a new disc + new key.
Boot from your new Windows XP disc .. delete any partitions .. create new
one(s) .. format and install.