I dont know if he will be able to run that application under Dos, he would need to to try check dir of the disk and see if there is a boot sector attached. Trying to run it from dos might be like, trying to install the non bootable xp disks which could only be run from inside windows.
If he installs his friends copy of Home then he should be able to boot his disk from inside windows without having to activate the Home addition, I would call compaq if all else failed.