Activate Small Business Server 2008 from demo media

No, your going to have to re-install.  Research shows multiple people in your same shoes.  Seems that sales folks will say anything to get the job done.

I once couldn't find media for Server 2003 Standard and just did a repair install. Perhaps I can try that here. Luckily its a VM and I can snap-shot it.

Anyone had any luck in this scenario?

You could try using the  slmgr  command line utility. This has numerous options that allows you to change the CD key, activate, rearm (extend trial) and much more.  just run slmgr /? to see the list of options. When you do so you get a popup. Clicking OK allows you to see the next page of options. There are 4 pages of options/switches.
slmgr /ipk allows you to replace the CD key.
I am not sure this will allow you to change the demo version but worth a try.

This still hasn't been solved. I'm going to attempt to install the VL we bought, extract the key, and then apply it to the demo version.

Do you actually have a VL (Volume License)? If so you can get your key from the Microsoft eOpen licensing site. However I have never seen a volume license embedded in the O/S. If you buy an OEM license fom Dell, HP or similar it is usually embedded, but it generaly only works with their media as the install files have been modified.

I do have a VL, but SBS is now embedded. I had to order the media through the VL site as it was the only way to install.

I wasn't aware of that, good to know.
How have you made out?

I'm going to start the process Monday of installing on a VM, extract key and try it on my active server.

Thanks for the update, let us know how it goes.
--Rob