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When you first encounter this prompt for your product key, just hit next and proceed with setup.

Choose which version of Windows you have purchased, check the box and click Next.

Once the first install of Vista is completed and you start the second install from within Vista, you'll need to enter your product key.

Choose "Custom (advanced)" to perform a clean install.

Once the second install of Vista has been completed, you can activtate your installation through Microsoft.
Microsoft internal documentation reveals workaround for Vista Upgrade DVDs with no need for a previous version of Windows

DailyTech reported on Monday that Microsoft no longer performs disc checks during an operating system install. In the past, when performing a clean install, a user could boot from an install CD and insert a disc from a previous version of Windows for upgrade compliance.

However, per Microsoft's new licensing requirements for Vista, users are required to install a Windows Vista Upgrade from within Windows XP. When this occurs, the Windows XP license is forfeited and the Windows Vista installation process can take place.

DailyTech has confirmed a new workaround proposed by Paul Thurrott (via Microsoft internal documents).

This workaround allows users to perform a “clean install.” The process is a bit tedious, but is not hard at all to complete. Users have to perform these simple steps to perform a clean install of Vista without a previous version of Windows installed with an upgrade DVD:

  1. Boot from the Windows Vista Upgrade DVD and start the setup program.
  2. When prompted to enter your product key, DO NOT enter it. Click "Next" and proceed with setup. This will install Windows Vista as a 30-day trial.
  3. When prompted, select the edition of Vista which you have purchased and continue with setup.
  4. Once setup has been completed and you have been brought to the desktop for the first time, run the install program from within Windows Vista.
  5. This time, type in your product key when prompted.
  6. When asked whether to perform an Upgrade or Custom (advanced) install, choose Custom (advanced) to perform a clean install of Vista. Yes, this means that you will have to install Vista for a second time.
  7. Once setup has completed for the second time, you should be able to activate Windows Vista normally. You can also delete the Windows.old directory which contains information from the first Vista install.

There's no telling why Microsoft left this loophole wide open with Windows Vista Upgrade DVDs, but this means that any retail upgrade DVD can be used as a fully functioning full retail copy of Vista.

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RE: Windows Vista OEM
By X2 3800 on 1/31/2007 11:42:56 AM , Rating: 2
Why retail? Because it includes MS support; OEM is "you're on your own -- see your seller for support." Hence the price difference. For most enthusists, support is not a concern, but for those that think they might need to call the mothership once in a while, the extra $40 (using Premium as an example) may be worth spending.

RE: Windows Vista OEM
By Le Québécois on 1/31/2007 12:16:37 PM , Rating: 2
Why retail? Because it includes MS support; OEM is "you're on your own -- see your seller for support."

No it's not just that, at least not according to this (the only place where I found clear information about the new EULA):

The new license terms say: “You may uninstall the software and install it on another device for your use. You may not do so to share this license between devices.”

Here are the practical implications of the change:

If you purchase a new computer with Windows Vista preinstalled, or if you build your own PC using an OEM version of Windows , this change doesn't affect you. Your copy is locked to that PC and cannot be transferred to another.

If you find another link with information that contradict this, you're welcome to reply to my comment, because I would love to pay half the price for a OEM version.

RE: Windows Vista OEM
By rtrski on 2/1/2007 11:11:32 AM , Rating: 2
With the retail purchase you also get x86 and x64 - don't know if the same is true for upgrade, but I believed it to be so.

OEM you only get one or the other. The assertion being "it can only be installed on one piece of hardware, therefore you "know" which you want ahead of time."

Specious argument, IMO, but that's another difference in the OEM vs. retail/upgrade price.

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