Turns out that it was going to a temp file. Run Disk Cleanup and it is history. I had to reformat and reinstall everything to find the answer. WINXP SP1, added WINXP SP2, now 42 updates; 41 was Validation Tool and it automatically Validated but it's location is under C:\All Users\Application Data and there is Windows Genuine Advantage!
From Microsoft is: If you have not already, I recommend that you use our online WGA Troubleshooter to identify the cause of the issue and its resolution:
My last item failed but it still works, I click on validate and says download item the required validation
Cameras that make great holiday gifts
Let them start the new year with a step up in photo and video quality from a phone.