This is fascinating to the amateur sociologist in me... I suppose some of this belies an interest in neurology as well. How people process information, particularly on subjects they don't fully comprehend. They will remember random bits and pieces, and then try and fill in the gaps later. Absolutely fascinating.
Anyway... You can only activate XP using the automated method a couple of times in about a 6 month period. After that, you have to call one of the numbers provided to have someone give you an activation code. You'll also have to explain a bit about what you've been doing. Every 6 months or so, the database keeping track of activations is reset. Supposedly at least, no one but Microsoft really knows for sure.
That also only applied to retail versions of XP. OEM copies of XP are different. All OEM copies are locked to the hardware they are first activated on. Low volume OEM copies have to be activated like retail copies, while high volume copies of XP have a special self-activating mechanism. Of course high volume copies of XP are the kind you get from big name computer makers, and the copies will only activate if they detect they are running on hardware from that company. So a copy of XP from Dell won't activate on an HP computer.
The official company line is that it's an anti-piracy measure, but it's really more than that. It's the first step in Microsoft's transition to a software as a service company. The erroneously named Windows Genuine Advantage program was the next step, and Vista's "improved" activation scheme is another. The confusing number of Vista bundles is also a part of this. Ultimately Microsoft wants to transition itself to a company where you pay a regular fee in order to use their software, not just some lump sum up front. I wouldn't be at all surprised if some of the speculation about the upcoming "Windows 7" is true. That you will just get a very basic OS, without a lot of the bundled apps we've gotten used to. Instead, Microsoft will probably make a big push to integrate it's idiotically named Windows Live services into the OS. Then you pay a monthly fee in order to use their email service or whatever else. Eventually, Microsoft would like to return us to the days of the dumb terminal, where we load a copy of Windows off of their systems every time we boot our computer. Then they can really turn the screws on people. Not only could they monitor every single action you take with the greatest of ease, but cut you off immediately if you did anything they didn't like, or even were just SUSPECTED of doing something they don't like. Even just because some IT guy was having a bad day, or has a bit of an inner sociopath that likes to come out and play every once in awhile, and cuts you off for no reason. You can bet that in the EULA there will be a clause giving them the right to terminate service at any time for any reason, and with no refunds.
Anyway, to bring this back on topic... Using a program like Acronis True Image is what I meant in my first post when I said you either make a disk image and back up the entire OS, or you reinstall everything individually. I thought I was pretty clear the first time about it being an all or nothing proposition, but clearly I was either wrong or someone didn't bother to actually read past the subject line on my post. I'll just assume that they are capable of reading and understanding written english. Despite the many times people have called this assumption of mine into question over the years, I guess I'm just a hopeless romantic at heart, and believe in the general intelligence of people. Sometimes it just needs some help to wake up from its hibernation and clear away the sleep fog.