From: "Rich Gauszka" 

looks like the loophole is to install Vista twice -

http://www.dailytech.com/article.aspx?newsid=5932

Microsoft internal documentation reveals workaround for Vista Upgrade DVDs
with no need for a previous version of Windows


Just when everyone thought that all hope was lost when it comes to
performing a clean install with a Windows Vista Upgrade DVD, a gleam of
light can now be seen at the end of the tunnel. A new workaround proposed
by Paul Thurrott (via Microsoft internal documents) has been confirmed to
work by DailyTech.

We reported on Monday that Microsoft doesn't perform disc checking anymore
during an operating system install. In the past, when performing a clean
install, a user could boot from an install CD and insert a disc from a
previous version of Windows for upgrade compliance.

Per Microsoft's new licensing requirements for Vista, users are required to
install a Windows Vista Upgrade from within Windows XP. When this occurs,
the Windows XP license is forfeited and the Windows Vista installation
process can take place.

Now, however, this workaround allows users to perform a "clean
install." The process is a bit tedious, but is not hard at all to
complete. Users have to perform these simple steps to perform a clean
install of Vista without a previous version of Windows installed with an
upgrade DVD:

  1.. Boot from the Windows Vista Upgrade DVD and start the setup program.

  2.. When prompted to enter your product key, DO NOT enter it. Click
"Next"
and proceed with setup. This will install Windows Vista as a 30-day trial.

  3.. When prompted, select the edition of Vista which you have purchased
and continue with setup.

  4.. Once setup has been completed and you have been brought to the desktop
for the first time, run the install program from within Windows Vista.

  5.. This time, type in your product key when prompted.

  6.. When asked whether to perform an Upgrade or Custom (advanced) install,
choose Custom (advanced) to perform a clean install of Vista. Yes, this
means that you will have to install Vista for a second time.

  7.. Once setup has completed for the second time, you should be able to
activate Windows Vista normally. You can also delete the Windows.old
directory which contains information from the first Vista install.

There's no telling why Microsoft left this loophole wide open with Windows
Vista Upgrade DVDs, but this means that any retail upgrade DVD can be used
as a fully functioning full retail copy of Vista.

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