SDC is set up to do the activation for you during install, but it's currently not working for if you are updating GC2. If you re-install GC2, or archive it, uninstall it, and restore the archive, the activation code should work.
If re-installing does not work, please check to make sure that you are using the California Server (in SDC under tools->settings->internet) and that your e-mail address is the one that you pre-ordered GC2 with or used to order your Total Gaming.Net subscription. If you are running a firewall, including Windows XP firewall, please add activate.exe as an exception. If you continue to have problems, please e-mail kwilas@stardock.com with your Stardock.net account information. He will be able to help you. Please give him any error codes that you received.
The new version of SDC should now activate GC2 from an update as well as new installs.
--Cari