You mentioned an old laptop that runs XP. Do you have a desktop computer as well, or just the laptop? Are you planning to buy a newer computer or laptop? If you're going to set everything up in your home, there's no advantage to a laptop-- a desktop computer might be better. But if you want to have a setup that can be "taken on the road"-- even if that really just means taking your stuff to a friend's house to play-- then a laptop is more desirable because of it's greater portability. The main issue besides do you or don't you need portability is probably the computer's horsepower-- CPU speed, whether it has multiple processors, amount of hard drive space, amount of RAM, etc. Basically, if you want to use VST instruments then you'll generally need a computer that can handle a heavy load. You can use your existing laptop for now and see how it goes, but eventually you might want to get something better.
Assuming you're going to use your old XP laptop for now, you'll want a DAW that can run under XP. Some free options are as follows:
Anvil Studio (
http://anvilstudio.com) -- Good for recording MIDI data, but I believe you must purchase an add-on module in order to use VST plug-ins with it.
SynthFont (
http://www.synthfont.com) -- Here the situation is reversed; you can use VST plug-ins but you can't record MIDI data, at least not in the free version (SynthFont, as opposed to SynthFont2 which isn't free).
Podium Free (
http://zynewave.com/podium-free/) -- I'm not sure if this is compatible with XP, but try it and see. The free version is just an older version of the commercial edition, with a couple of limitations that probably won't affect you. It can record MIDI input and can use VST plug-ins.
LMMS (
http://lmms.sourceforge.net/home.php) -- I think you can record MIDI and use VST instruments, but I'm not sure.
There are others, including non-free but inexpensive DAWs such as Mixcraft (
http://acoustica.com/mixcraft/) or REAPER (
http://www.reaper.fm/).
When you use a VST instrument with your MIDI keyboard controller, your computer (and the VSTi software) acts as the sound-generation device, and the drivers for computer sound cards can be slow, leading to "latency"-- i.e., you press some keys on your MIDI keyboard and it takes a moment (sometimes a long moment) before the computer plays the sound for those keys. To overcome this issue you'll want to use ASIO drivers. I've read that it's best to use ASIO drivers that were designed for your specific hardware (if they're available), but if you can't find any then you can use the free ASIO4ALL driver (
http://asio4all.com/).
As far as free VST instruments, you can look through the lists on sites like
http://vstplanet.com/, or search using terms like "free vst instruments," "free vst plug-ins," "free soft synth," etc.
Edit: And if you're particularly interested in specific types of virtual instruments, you can search using more specific terms like "vst acoustic piano," "vst electric piano," "vst harpsichord," "vst organ," "vst guitar," etc.