Mailing the story:

When I first setup my VMware Server to run an existing Windows Install from a physical partition, I was asked to reactivate Windows XP before I could use it as a guest OS. I received a lot of complaints from people saying that they were then again asked to reactivate Windows again once they booted back into Windows natively, and then again under VMware and so on every time the OS was booted in a different environment. If you replace the WPA files prior to booting based on whether you’re using VMware or booting natively you won’t have to reactivate. Here's how to do it.