Software Deployment

As far as I know this is a problem concerning the licence model.
You should've used a volume licence key which doesn't need activation.

You are correct. I had been given what turns out to be an MSDN License Key. I wish the following information had been posted somewhere, as it would have helped me quickly zero in on the root cause:

Microsoft software installation requires both the CD-Rom media and a License Key. During installation, the License Key is used to create the Product ID code (this is found via the Help>About menu.) After successful installation, the application evaluates the Product ID code to determine if additional Activation is required when it is launched. If no additional Activation is required, the application launches and is available for use.

If Activation is required, the user will be prompted to Activate the software. Note that Activation is not the same as Registration, as it is anonymous. Microsoft typically provides either telephone or on-line Activation methods. Some software provides for an evaluation period, where it will provide full functionality even without Activation. But, once the trial period is over, the software will typically revert to limited functionality, such as allowing viewing but not editing. When Activation is required, Microsoft typically also provides a Product Activation Wizard and shortcut to make it easy to start the process.

Whether one uses the telephone or on-line Activation methods, successful Activation results in license registry entries being applied to the software. These entries result in providing access to full product functionality and eliminating future prompts for Activation.