This sounds like a problem with a hacked copy... Are you 100% sure this is a genuine disk? Is the surface of the disk shiny and holographic?
Also, why are you inputting an activation key? Windows automatically activates online is it not working for some reason? Also, all windows activation boxes allow copy/paste. If you can type it into Notepad, then copy it over into the activation box.
Honestly, it sounds like you are using a keygen and an activator generator (which is a rather outdated way to crack XP btw...) which is telling you to input a key that your unique system code would not have allowed to be generated. Meaning when you activate by phone, you have to enter that huge alphanumeric string. That is used to generate the activation key. If your string cannot possibly produce a 5 or 1 in the activation key, then it will not allow you to input them.