I followed the directions to the T on how to install the new cd keys for multiplayer use.. but now when I try to log in to the server of choice.. it tells me my CD key is banned? Am I doing something wrong here?

Since Gamespy dropped support for NWN server admins have had to adopt a variety of scripted solutions to protect their server vaults from account thieves, griefers, exploiters, and other problem players. Can you connect to other servers or is it only a handful rejecting your CD key?

If you can't log into any server, anywhere you have a real banned CD key. Only getting a new key assigned by GoG will let you log in. That's exceedingly improbable, though. I'm not even sure banned CD keys are even really banned any more now that the authentication server is down. It's much more likely you've been banned by the server admin.

If you are only being blocked by a single server (or a few popular servers as some server admins do share ban keys) but can connect to others you are being banned by the server admins. When banning a CD key using the server client or an OnClientEnter script it doesn't actually use the entire key, so I suppose it might be possible that you are being punished for using a duplicate CD key, but I'm inclined to doubt that. It's much more likely that the generic CD key is banned on that server and you made some kind of mistake overwriting the CDKey.ini file.

In addition, if you used the default CD keys that come with the game to start to play on that server, then installed the new multiplayer keys you were emailed, the server may be blocking you because the different CD keys make it look like someone else is trying to login to your characters.

The scripted/coded system I use in my PW/server does this. The first time you log in, it grabs a portion of the CD key information (8 (I think) digits called the "public cd key"). If it's your first time logging into my server, your username is entered into a database along with that public cd key. Afterward, if anyone (even you) tries to login with you username, they get automatically booted from the game if the cd key doesn't match with that first one.

A server admin should have a way to wipe that outdated cd key information clean from the database so you can login with the new set of keys, but you'll have to contact them (via that server's forum or the admin's email). The method would vary based on any changes he or she made to the coding.

Hmmm... given that explanation it's also possible that the chosen username of the player just happened to collide with one of another player. Since there's no longer any account validation, there is no assurances a username will be unique.