WadeW,
Welcome to the VMware Community Forums!
>I was under the impression that the Import Machine was a clone of the pysical machine. Am I doing some thing wrong.
It does make a clone of the physical. The key difference is the hardware presented to the operating system. More than likely, you have an OEM licensed version of Windows. It is against the MS Windows ELUA to move an OEM version of Windows off of that hardware onto another system. This is why you are seeing the activation screen.
We only support converting a volume license of Windows.
If you have a Windows XP Volume License, you might be able to do repair/reinstall to change how the licensing works, or contact Microsoft for options on converting the OS from OEM to Volume License.
Regards,
EvilOne
VMware vExpert 2009

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