It's impossible to play PSO without a serial. If you don't have one, that means whoever owned that DC before you played PSO and saved his serial to the flash. When you try to go online, it's going to reject whatever serial you use, because it doesn't match the one saved in the flash. In order to convert a V1 character to V2, you need serials for both.
Basically, if you want to play online, you will need to erase your flash memory, delete your character, use the serial that comes with your V2 disc, and make a new character. You won't be able to play V1 unless you also get a V1 disc with a V1 serial. Once you have V2, there's no reason to mess with V1 anymore, though, so you can just sell your V1 disc.
"Fear the HUnewearl."