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A friend of mine who is quite computer literate told me that you don't have to activate after re-installing because there is no way for "them" to stop your computer from working. Is he correct? I tend to think not . . .

As far as I know, every time you install or reinstall Windows XP, you have to activate it, or it will keep bugging you for activation, then after a month it will stop working and Windows XP will only boot in Safe Mode.
"If at first you don't succeed, skydiving may not be for you."
-Our tour guide at Fenway Park in Boston, MA.

If you re-install the original software that came with a brand name computer using the proper single Recovery CD or Recovery CD set, if your system components have not changed more than an allowed amount, Windows is Activated automatically in the background near the end of Setup.
However, most brand name system computers these days do not come with a single Recovery CD that you can use along with the data contents of your untouched second partition on the orignal drive, or a Recovery CD set that you can use if the second partition data is not intact or if you need to load a blank hard drive.
In a small number of cases, you are compelled to make a Recovery disk set when you first start up the brand name computer, but otherwise, you are supposed to make it or them yourself by using (a) program(s) provided by the brand in your Programs list somewhere, while Windows is working fine.
If you have a generic system, or a system that has had Windows installed from a regular Windows CD, or CDs (OEM XP MCE), or a DVD, what your friend says may very well be possible, but it's not legal, and it's not something the average person would want to mess with. Lots of things are possible if you're willing to cheat.If you don't do something out of the ordinary, the default is you won't be able to load most Windows Updates manually until you Activate Windows, or be able to log into Windows after the default time limit. The last time I checked, Automatic Update still works for XP if Windows is not Activated, but it takes at least several days for it to load the updates, some updates and other Windows software will not load unless Windows is Activated, and you will still have the time limit to contend with.
If your system components have not changed more than an allowed amount, and if you are using a valid Product Key, Activating Windows near the end of Setup, or after Setup, usually works without a problem.

There are simple tricks to get around it but they can't be discussed in these forums. Google is your friend ;-)

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