Windows xp activation

I am trying to activate an upgrade XP on an old Dell Inspiron 1300 series for my nephew.
Microsoft confirmed via phone that my copy is a valid one and the key is legit.
I already tried using the validation ID over the automated phone service; to my surprise a tech came on the line offering the help for $99.00 claiming it was because XP is obsolete.
I understand it went down the tubes but there must be a way to activate the disk.
Anybody have any suggestions???
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Clarification Request
Is this the way you tried ...

to get it activated?

To start the Product Activation Wizard:

Click Start.
Click All Programs, and then click Accessories.
Click System Tools.
Click Activate Windows.

In the Product Activation Wizard, follow these steps:

Click Use the automated phone system to activate.
Click the drop-down menu, select the nearest location to you, and then click Next.
The Microsoft Product Activation Center phone number is displayed at the top of the window.

That is the proper method for phone activation.

Even without Internet if the computer has a modem you can get it activated. This link steps you through the three methods for XP and there is no charge for activation. They do charge for help with installation.

This assumes that the upgrade CD is retail and not OEM because OEM is tied to the specific computer it was deployed on (the system's motherboard to be precise).

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Windows xp activation

Activation methods
You can activate your copy of Windows XP by using any one of the following methods:

Activate Windows XP by using the Internet

If you use this method, the Windows Product Activation wizard establishes a connection to the activation server, sends your installation ID, and then processes the activation request.
Activate Windows XP by using your modem

If you have a modem but you do not have an Internet connection, the wizard detects your modem and establishes a connection to the activation server through your phone line.
Activate Windows XP by phone

If you do not have a modem or an Internet connection, you can activate Windows XP by calling a Microsoft customer service representative. The Activation Wizard displays the toll free number that you can dial.

The following sections in this article describe how to use each of these methods.

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