Reboot and go into safe mode again. Disable your firewall and reboot again except this time go into safe mode with networking. There is a possibility that your firewall is stopping the system from connecting to Microsoft's web site and authenticating your copy and activating it. When you restart after this then restart in normal mode. If this does not fix the problem then:
Because of the confusion with the disks the only true and legal option you have is:
You can backup your data and do a complete system reinstall using the Packard Bell Recovery cd.