Microsoft has made some changes to activation of Windows Server 2008, Windows Vista and Windows 7 as quoted below.
Recent Changes to Volume Activation
With Volume Licensing for products such as Windows 7, Windows Server 2008 and Windows Vista, you must use a new type of product activation called Volume Activation (VA). To activate these operating systems with VA, you can use either a Multiple Activation Key (MAK) or Key Management Service (KMS), requiring a KMS key.
This means trouble for us offcourse 
When trying to activate a Windows Server 2008, Windows Vista or Windows 7(unconfirmed), I get this error:
Key management services (KMS) host could not be located in domain name system (DNS),
please have your system administrator verify that a kms is published correctly in dns.
0X8007232B.
I have also gotten this same error where it reported the same error code but the error message was:
DNS name does not exist.
This error, for me at least, has nothing to do with KMS.
It is stated on Microsoft.com to be an error related to trying to activate a Multiple Activation Key(MAK) while not having access to a Key Management Service (KMS).
If you have your volume license key (MAK) all you have to do is rightclick “My Computer” -> “Properties” and scroll down to the bottom of the page. Here you can change your key. Even if you did it during installation!
That’s all it took for me at least.
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Thank you. Worked perfectly.
entering the product key worked for me as well. thanks for the heads up
Thank you for this easy and effective solution. I applied it and it worked.
Microsoft’s solution found in this article, but I prefer yours.
http://support.microsoft.com/kb/929826/
I can confirm that this exact problem occurs in Windows 7 Enterprise, and this solution works with Win7 as well.
I installed Win7 Enterprise with the KMS key. I don’t have a KMS server. I changed the product key as described to the same key that was entered during installation. This successfully activated the product.
Worked like a charm! Thanks for the USEFUL Info!!!
Yep. Thank you so much.
Thanxs, you saved my day (evening)
When i try to change the product key, it gives me the error DNS name does not exist.
Hello Amina
Not quite sure what your problem is there.
When I had that exact same problem all I had to do was change the key.
http://code-journey.com/2009/07/01/vista-windows-server-2008-windows-7-activation-problem-0x8007232b-dns-name-does-not-exist/
Thanks! Tried this after much frustration and it worked first time.
Thank you. This saves me a lot of time.
Sometimes the problem is that you get a system update while out on the road. Thank god for VPN.
I tried but it didn’t worj it tell the same thing im going crzy dude please hlp me
Thanks! I was pulling my hair out trying to figure out why I couldn’t activate.
Never thought of re-entering the key, as it was already correct.
worked great – thank you!
Worked great, many thanks.
There is also a command line interface. Type slmgr at the command prompt to get the list of valid commands.
I didn’t know that. Thanks for the tip!
but where on windows seven you guys??i looked on control panel i couldnt find system>change productkey
Hi there,
You can right-click “My Computer” and click “Properties”.
.
You will find the “Windows Activation” area in the bottom of the screen.
I can’t see the link I mentioned now either. Not sure if it changed or I made a poopoo
yes!!!!!