You can use the key you have, but you still won't be able to update. The newest version of Windows Update makes you verify your install online (as you now know). if you have a key from a major computer manufacturer (Dell, Sony, etc), it will recognize that, and it won't verify unless it's on one of their computers. (Don't ask how I know this.
) Also, if you have a key that's been installed on another machine, it won't let you update.
You can still use Auto Update though. It's a pain in the ass, but if you configure it the way you want, it's really not that bad.