The information, if an Activation Key can be used multiple times on the same machine, is coded into the key. Therefore the key has to be generated with the option Unlimited Installation.
If the License Generator is used, just check the option: Unlimited Installation additionally
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If the Automatic License Generator is used (see also create Serial Number automatically) then you have to set LocalReuse = yes in the config-autongenerator.xml file.
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If you are using the Activation Server, you also have to add the definitions for the server.
See also
Web Activation Server definitions
Page url: http://www.helpserver.biz/onlinehelp/lp/easygo/2.7/help2000/index.html?reinstallation_create_key.htm