I had just ran into an issue attempting to activate my copy of Windows 2008 Server downloaded from MSDN. The error expands to “DNS Entry not found”, although all networking features work fine. The issue was that it was attempting to validate against an Activation Server rather than Microsoft’s website. The solution was to open “System” in the Control Panel, down at the bottom of that window is a link titled “Change Product Key”. I entered my key from the MSDN website and Windows activated automatically after the key was entered.