I received the following e-mail from Microsoft instructing me how to solve the WGA problem. IT WORKED.
So I am posting it for all who are having problems with WGA
After double checking the information collected from the Diagnostic
Tool, I am glad to inform you that the Product Key is genuine and the
system is not invalid. Therefore, the issue was most likely caused by one
of the following factors:
1. A security program running in the background is preventing the
validation tool from running properly.
2. The Windows Genuine Activation (WGA) engine was not installed or
running properly.
We can take the following steps to see if the issue can be resolved.
Step 1: Temporarily disable the security programs for troubleshooting
purposes only
==============================================================
The following programs can prevent the validation tool from running
properly:
Norton Security programs
Panda Antivirus programs
Web Accelerator programs
Anti-Spyware programs
Pop-up Blockers
If any of the above programs cause the issue, please check if it can be
re-configured to accept the WGA ActiveX control. Otherwise, please
temporarily disable it to enable the WGA validation tool to work. However,
please ensure the program is re-enabled after we complete the
troubleshooting steps.
Step 2: Install the WGA engine manually
==============================
The WGA engine may have been already installed, but is not working
properly. We can use the following steps to install the latest version of
WGA. This will ensure that the engine files will be copied and
registered properly.
1. Click Start-> Search.
2. Select "All files and folders", and then search for the following
files:
legitcheckcontrol.dll
If you find the above file, please right click to rename this file to
(such as legitcheckcontrol.old).
3. Please download the update KB905474 from the following website link
and save it to your Desktop:
http://go.microsoft.com/fwlink/?linkid=694984. After downloading the update, please double-click the downloaded
file on your Desktop, and it will be launched automatically. Please follow
the instructions to install it.
After we have finished the above steps, please restart the computer and
try to validate Windows again.
If this did not work I was to rum the Diagnostic test and send to microsoft support engineering team but this worked.