I have built a few systems now with with WinXP on them and had relatively no activation troubles at all -these were perfectly legal installs.
Today was different, however, after I replaced the failed motherboard of a low-end emachine with a "near" identical board - WinXP then demanded to be reactivated in order to log on. Activation via Internet was refused when using the sticker product key, so I called Microsoft and was passed to 3 different people at 3 different numbers, the last guy refered me back to emachines -emachines told me it was a software issue with Microsoft and refered me back to Microsoft
Finally, I ran the product restore CD -loosing all of a 5th grade classes data and custom settings (not a big loss) and at last the product activated okay over the Internet using the sticker key on back of the box -sheese!
What a hassle for honesty sake.