I buy and build a lot of computer equipment, 99.9% mail order. (newegg.com) For some things like monitors and laptops a local store is better, not for tech support, no shipping is involved for a DOA unit and I can try everything out in the store before I take it home. Chances are you will get a better deal as well. Just watch the weekly adds, usually the Monday or Sunday paper, rebates suck but on a laptop, they can save you plenty. Anther advantage is actually holding the laptop to see how big it is and how heavy it feels.
Used or refurbished can be good, but chances are unless it is directly from the manufacture the battery is not warranted to work. Batteries can be expensive and they do have a finite life.
In your price range you will be able to find a 15" screen, CDROM/R/W/ & DVD player, Pent IV 2+ gig, 512 Megs of ram and at least a 40 if not a 60 gig drive. A lot of them also have wireless capability built in too.
XP Pro is only required if you want to do remote management of your computer. MS has a chart of features here:
www.microsoft.com/windowsxp/pro/howtobuy/choosing2.asp