Yes, that sounds right, though I can't be 100% certain. The license key from TechNet is a full retail key, not temporary, but this one does not belong to you. To use the Professional Upgrade license that you have purchased legally, you need to have an activated copy of Windows installed.
As I recall, Vista was fairly loose about the upgrade paths and you could upgrade from Vista to Vista. That's how folks were able to use an Upgrade disc to do a clean install with the original release. That capability was removed in later Vista releases, and I would expect Windows 7 will be more rigid about the rules. It certainly makes sense that you could not install an Upgrade over a Retail version of Windows 7. Since a Retail license is better than an Upgrade license, this would be a downgrade! Very confusing.
Also, as I understand it, an upgrade from and to the same version of Windows (Vista to Vista, or 7 to 7) is considered an Anytime Upgrade and you would need to follow the WAU path to do it. Bottom line, I think you should do a clean install of your Windows 7 Professional Upgrade over the activated XP Pro when you receive the Upgrade copy that you ordered.