I bought a second hand copy of windows xp from someone that has upgraded to vista, but windows site says it's pirated and it's been blocked. It seems like there's no redress and nothing I can do. Anyone got any ideas?

That person you bought it from may be using a Vista Upgrade license; in that case his XP license is tied to the Vista Upgrade license which means that the XP license is considered still in use. Anyone attempting to use his XP license would get the message you got.