Strange XP Home Activation issue @ Logon

Customer brought me a laptop w/ XP Home that has a strange issue concerning XP Activation and Logging on. It boots to logon choice menu, then gives a message that Win XP needs to be Activated, I say OK, or no either way no logon. If I say yes I'd like to Activate XP, up pop's Windows XP Activation winow, which say's it already has been activated, click OK, I do and it logs off the user. Just a loop no matter what I can't log on to any user. Tried last known good config., safe mode, etc.

Anyone ever heard of the problem & a possible solution? There is data I need to recover.

TY all in advance.

cglrcng