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Help with system recovery please!

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Not sure about W7, but with XP, the product key MUST MATCH the media, or the install will fail. Most likely the COA on the PC is an OEM version of Windows, not the same.

Been there, done that. will go along happily then won't take the license key.

DBAN is no different than formatting the partition....the only issue would be if it wiped the whole drive, taking out the diags partition and so forth. No different than installing a new blank hdd.