I did a fresh install of WIndows XP Home Edition, installed each Service Pack and then running the Windows Update. It asked me to activate the box so I entered in the License Code from the sticker on his laptop.
The window came back as "Activation Successful". I finished the update of the OS and wanted to install WIndows Essentials to give him at least a little AV security on the machine.
When I go through the WIndows Essential Installer it barfs and says the version of windows I am running fails the "Genuine Advantage" test.
After much searching on the Internet I came across a post to download the MGA Diag tool (http://go.microsoft.com/fwlink/?linkid=52012). I download and run the tool, it indicates I have a "Time Synch" issue. I check the time and sure enough it is 29 days IN THE FUTURE. I change the Time by hand and then set the clock to sync with time.nist.gov and SUCCESS!!
I rerun the Microsoft Essentials tool and it WORKS!!