I have a ancient XP desktop with a OEM version installed. I can extract the key,(there is no sticker, have to use a program), but I have no install disk and corrupted i386 folder. I was planning to install to my 7 month old windows 7 laptop, as there is a 180 GB partition that is blank. Is this possible? And,if so how do I do this?

In sort, no, as the licence key you have is for the (old) hardware it was installed on.
OEM keys work differently from others.

I agree with Curlyben.. You should get a full retail XP for best results, or try Linux Mint. But it can be done from what I have seen (BartPE+other software or Norton Ghost?) but it's not worth the bother I think being that it's an OEM and not legit. I guess you could try to test it out 'for fun' on a virtual machine on that same PC to see what happens, just make sure you abide the MS EULA, I think all you need is another legit OEM key - one for the host OS and one for the virtual machine.