Anilrgowda

We got our hands on a retail copy of Windows Vista Ultimate upgrade and have successfully tested the way you can do a full install with a Vista upgrade key, without owning a previous version of Windows.
This directly violates Microsoft's terms and conditions, so isn't legal, however the end product is a fully licensed and authenticated copy of Vista. Current indications suggest Microsoft has no way of knowing whether or not you used this method to install Vista.
The benefits of this method are twofold. In the UK, where we suffer Microsoft's wrath over pricing, the Vista upgrade packs are 55-68 per cent cheaper than the full versions.
Secondly we've found the upgrade process from Windows XP a dirty affair with programs often given the wrong security permissions so they won't run. Unlike previous Windows upgrades, you can't insert the old Windows CD and enter a valid licence number during the upgrade process of a formatted hard disk. A clean Vista install lets you start afresh.
Although there are many other guides detailing how you do this, many of them use RTM instead of retail copies of Vista and none of them appear to have tested an Ultimate version.
The whole process takes just over an hour and is astonishingly easy to do:
- boot your PC from a Vista upgrade CD
- skip over the step where it asks you to type in your licence key by pressing next
- select 'Clean Install'
- once installed, let your PC boot up Vista
- run 'setup' from the Vista CD from within Vista
- go through the install process again
- this time enter your licence key
- select upgrade, instead of clean install, when prompted
And voila. Vista will then authenticate with Microsoft's servers and you have a clean install of Vista using only an upgrade licence key.

Source:The Test Bed: Using a Vista upgrade CD as the full version - computer product reviews and news