You can only activate XP on one machine at a time. You can install it on a second PC but it will not activate while still on the first.
Your Idea of 2 activations on the same PC via different partitions is an unusual one, not quite sure if it will. I have a feeling that once the first activation takes place it will not accept the second activation but then again because it's on the same machine it may not ask you to activate the second time. Give it a try and see.
You can of course activate XP as many times as you wish on the same machine [Same drive] after a format for instance or if you remove it from one machine and install to a second one then it will activate again. [Retail version].
OEM is supposed to stay with the one machine for life but again if it's removed from the original machine it should activate on another. Mine did.
Provided XP is being installed in the same PC and with no change in hardware, you should be able to copy the "wpa.dbl" activation file from one partition to the other. Boot into the normal partition, copy the file and paste it into the same path in the second partition.
It is in C:\Windows\System32\wpa.dbl
Similarly, if you keep a copy of this file, when reinstalling XP it can be copied back to avoid having to reactivate. The file will only work in your computer - it is not a method to allow activation in a different PC. To copy back after a reinstall probably involves using either Safe Mode or booting to a command prompt.
Just checked my pc after an Olympic break... seems to have caused quite a debate with this one! I like the mgmcc idea & will proceed with this as it seems that windows update should accept update requests from either partition... after all the registration components are the same for both. I'll report back in a day or so to say if it works or not.
Been trying this out for a few days (mgmcc's suggestion), but i still get Windows telling me how many days I have left to activate. If I go through the activate wizard will it accept it for the second partition install, but then refuse to update the first partition install?
Ha... we've been answering each others new posts! From what I can make out the only difference the activation record will show is the partition used? What I have now is a second partition unactivated with SP2 installed... no programs but very stable... 1st partition with all my current programs & a little unstable since SP2 was installed. I'm now thinking I'll use the clean OS with SP2 & start again.