Activation is the reason I never went with Windows XP. I just didn't want to deal with it. I'm still cruising along with Windows 2000 Pro (although I'm typing this with my Dell laptop using Mepis linux). I remember people being upset with activation when XP came out, but it looks like most folks finally accepted it, just like they will with Vista.
Activation is one thing. Re-activation is another (apparently likely under Vista? don't recall about XP). Win2K is as far as we got in our house (a copy of XP has been sitting on the shelf uninstalled since Nov/Dec 2001 -- though I did open the box back around 2005); my main machine is now Kubuntu Linux.
BTW, Xandros is very good if you haven't tried it. I'm a windoze guy trying to ween off the tit. Linux is still Greek to me. Xandros has a feature to make it look and feel like Windows to lessen the learning curve.
Most people use a Dell or HP so they don't have to activate or register other than the first time, which is no big deal. The pain is when upgrading or OEM. Every Windows XP upgrade I have done required me to call the Indians to get it activated. The Internet activation would never work. On top of that the Windows Genuine Software thingy is automatic in the Windows Update, so again most would never notice it. Then again I come across to many PCs that have the lock icon down at the bottom and find out that the user has never updated Windows.