I don't remember needing to be connected to the Internet to activate it. There should either be a license sticker with the code placed on your computer by the manufacturer, or a sticker on the green booklet that comes with the CD.
I believe that XP has an option to register by phone. I wouldn't worry about doing it over the Internet as much as I'd be worried about using Zone Alarm. Zone alarm will not allow you to download "YEnc" Encoded files, pictures, music or what not. After installing XP, go to the services MMC panel and disable the Messenger service. That is one of the most important thing you can do :)
Good luck.