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It kept telling me to activate so I finally did and it failed (probably some kind of HP/Compaq system poking) and told me to key in the COA. The thing installed perfectly, allowed for rebooting and all kinds of updates. I remembered I had an 'HP/Compaq XP HOME for ULTRA LOW COST PERSONAL COMPUTERS with service pack 3' disk and figured, what the heck. I know you can do some fooling around with a special disk setup to get working but I was in no mood to start prepping a disk or doing some kind of slipstreaming. Windows XP Home Edition ULCPC (Ultra Low Cost Personal Computer) is a rebranded Windows XP Home Edition designed for small, lower-spec computers like netbooks and is only available for preinstallation by hardware makers. It would come up with a immediate request to activate but not work online or provide a alphanumeric string for the telephone activation.
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The 'recovery partition' was gone or damaged and would not work so we tried an OEM install of XP home but then the COA on the bottom was a ASUS XP HOME ULCPC and it would not work.
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We got an Asus EEEPC 1005HAB in for virus work and it ended up we needed to reinstall XP. I know this thread is over a year old but I had some info that might help someone in the future.