This will work in theory, but you only get a max of I think its 3 activations so after that you would have to ring up Microsoft and beg for more. As long as the three installations are not running at the same time this should be ok, I wouldn't like to say how you would stand on the licence terms doing this but as far as I can see it should physically work.
As for the licencing part you could look at it like this.......Windows enables you to install it onto a mirror'd raid, in this you have two drives, both with the same info on, so if one dies you have a copy on the other one, so in essence you have two installations of windows, one on each hard drive, yet you are only using one at a time, so if you pulled one drive, the other would take over.
So installing xp on several partitions and only using one at once is theoretically the same thing, just in a different way, as for how Microsoft sees it is another matter.
if licensed for one xp then you can only install one, anywhere – mic84 – 2012-02-06T12:00:58.907
One could argue that taking a backup image of your hard drive is breaking this install only one copy though as the OS would be on your laptop AND on the backup drive, but only being actually used on the laptop, the same theory could be made here................. – Iain Simpson – 2012-02-06T12:06:00.887
@mic84 Can you provide a reference for this? It is not how I would interpret the EULA, and I have rechecked it, but as always, the problem with EULA's is that need interpreting. (I have an old XP machine which I think has a backup install of windows on a second drive. Don't think it has ever been used, but the intention was that it has the necessary drivers loaded to be able to restore the main drive if it is ever needed. If what you say is correct, then this is illegal) – sgmoore – 2012-02-06T12:42:50.087
Sorry for the late reply:-Is Raystafarian's answer ok? Unless your microsoft licence came with more than one licence, (which Microsoft would know and should be displayed somewhere?),it is still 1 licence = 1 install. This may help:- http://dailycupoftech.com/2008/05/21/ms-eula-in-plain-english/
– mic84 – 2012-02-06T13:06:54.180@mic84 i read the plain version and no where can i find that ur bound to only one installation on the PC u choose. It does say single PC but doesnot specify the limit on number of partitions it can be installed on. So that would be Raystafarian's is correct i guess?/ – Doopy Doo – 2012-02-06T14:16:10.743
As Microsoft has told me several times, "Contact your attorney for legal questions concerning our eula" As they put it, Microsoft lawyers made the eula and granular interpretation should be done by your attorney. In other words Microsoft does not have a clue and will sue you when they do. That being said Microsoft rarely (if ever) sues individuals or small companies for putting one copy of XP on 3 partitions of the same PC hardware, if they did half of us would be in jail. – Moab – 2012-02-06T23:55:17.237