Vista Home, Windows must reinstall to activate, stuck at Login screen

Well the title was hopefully discriptive and brief enough to get some skilled help on this one so here is a bit more details.

I am working on a DELL XPS 410 with Vista Home Premium build 6000, its a couple years old. Its not mine and I am not entirely familiar with the machine. I do know this it can handle vista fine and works well until yeasterday. I am told the machine came from Dell and was bought just as Dell switched to not offering XP anymore. I do not know what updates have been applied.

Error Details :
Boots fine to login screen, then I get error message "Windows must be reinstalled to Activate" I hit close and get droped to Login screen. I click admin user (only user available) and get the message again.

As an additional error the bottom right of my screen reads This Copy of Windows is not Genuine. Windows Vista Build 6000

I do have Windows 7 and OS X Snow Leapord disks available if I need to use them but would rather not. I do not as yet know if Vista disks are available.

What I need:
I need to recover critical buisness files from the computer if at possible before doing a reinstall.

Attempting a safe mode boot to try and recover files now while I wait for "hopefully prompt" response.

As an update, I am able to login via safe mode and in the process of backing up files.

I still do not know the cause of my errors above and would greatly appriciate some insight.