The only version of Windows that has a Non-Genuine triggered Reduced Functionality Mode is the original Windows Vista (it was removed from Vista in Service Pack 1 and 2) Neither Windows XP or 7 would lock you out due to a Genuine error. My feeling
is that there is a deeper issue and the Non-genuine error you saw was one of the side effects.
Are you able to startup Windows in Safe Mode?
Darin MS