Activation will be hacked. However, that should be the least of your worries where Win XP is concerned.
Microsoft will spy on you using a number of clients that come as standard. These clients are intended to form the infrastructure of the .Net initiative. They include IE 6, Windows Messenger, Outlook Whatever, among others. These clients will surreptiously upload data about your hardware to Microsoft, will download key updates (IOW crippling features) to your machine without your consent, etc, etc. By doing this, Microsoft intends to get users slowly used to the new role of "Microsoft the network service provider" as opposed to "Microsoft the bloated software maker".
There's also the whole licensing fiasco. Win XP will not let you play media files unless you have a license for them. The first time you migrate any media file into the Win XP partition, the media file will be encrypted, and the decryption key inserted into your license collection. You will be required to make frequent backups of your license collection. Should a virus force you to reformat, or should your hard disk go bad, or should you somehow lose access to your license collection, all of your encrypted media (music, video, etc) will become inaccessible. The data will be there plain as day, but since it's encrypted, without your decryption key (license) it might as well not be there for all you care.
Win XP will break or otherwise limit the capabilities of standard CD burning software. (Adaptec, Nero, Discjuggler, etc) Users will be "encouraged" to burn their CDs using the included Microsoft CD burning software. Each CD burned will make an entry in your license collection, data will be burned to CD in encrypted format. A CD burned on Win XP box A will not be read by Win XP box B, or for that matter, by any other box on God's green earth, unless you migrate your license along with it, which will be made very cumbersome by Microsoft. Very likely, the number of times that you can migrate licenses from your license collection will be limited in order to prevent piracy.
Do you still want Microsoft to innovate you up the ass? Then upgrade to Win XP! I personally will upgrade to Linux.