One License and multiple PCs, how does it work?

"An OEM licence can only be used on one computer and only one computer - it can be reactivated as many times as you like, but again, only used on one single computer and not transferred.

A Windows Fully boxed product can be installed on as many machines as you like as long as it is only one at a time.

On all of these, if you do it to much, activation will fail however it is just a matter of ringing up Microsoft and explaining the situation, they will either give you a code to type that will activate Windows or give you a new key.

To your points.

Yes, really just a legal point.
No, Windows update will continue to work on both.
No, and even if it did, Microsoft have weakened the security, worst case scenario is you have a 15 second wait at start and no desktop wallpaper.
Not really.

However, if you have a new pc and just want to transfer files, Personally, I would put the hard drive of the old one either in an enclosure or just connect it directly to the machine."

"Check out the wikipedia Windows Genuine Advantage page and this Microsoft social.answers page. It explains that you should still be able to receive security updates on both machines. You may start getting pop up boxes about your machine not being 'genuine'. However, question #5 on the social page is interesting:

From what I've read about the program that verifies you have a legal version of Windows running, Windows Genuine Advantage (WGA), it collects the activation key from your computer and compares it to all the other computers running Windows. If it finds that two computers are using the same key it concludes both are not genuine it can shut down Windows in some way on both machines. So - if you legally move your Windows 7 upgrade install from one computer to another and WGA collects your key and finds it's being used on a different computer what keeps it from shutting down your computer? How will it know it's still a legal install? And in this and the questions above what happens if WGA falsely determines your installation is not legal even though it's only on one computer at a time?

The Microsoft MVP answer:

The first install takes presidence[sic] till a phone call adjusts that.

The Windows Genuine Advantage FAQ is pretty blunt:

Windows is licensed for use on a single PC and can not be shared among multiple PCs. If you receive a copy of Windows pre-loaded on your PC, you can not transfer the license to another PC."