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I kept getting a "User not activated" error post 1.2 update with borrowed Adobe DRM books, and per the B&N Community forums was not alone.
If affected you need to delete a folder called Digital Editions *and* a file called ".adobe-digital-editions" from the Nook before re-authorizing with Adobe Digital Editions 2.0. If you're on a Mac the .com file will be hidden! So find a PC or use the terminal to view hidden files.
Just FYI and hope this can help someone.
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