Xp sp3 upgrade to w7 can't activate

You may just need to reload XP and then reup Win7.

Do a clean install.

The upgrade path from XP to 7 is a clean install. The inplace upgrade to 7 is only available from Vista.

Suggestion - retry the activation over the internet. If it still doesn't work, retry the activation over the phone. As part of the activation process you get an option to phone Microsoft, they provide a freephone number so you can do this.