Attempting to activate / convert an evaluation copy of Windows Server 2016 (specific build 14393.rs1_release.161220-1747) to the full version using a valid retail key, resulted in the following error:
This edition cannot be upgraded.
A solution is to perform the activation via console with the following command:
Dism /online /Set-Edition:<Edition> /AcceptEula /ProductKey:<ProductKey>
where <Edition> is either ServerDatacenter or ServerStandard and <ProductKey> is your product key with dashes.
The Deployment Image Servicing and Management tool may indicate that it has finished installing product key, but then hang at 10.0% on the next step:
Removing package Microsoft-Windows-Server.....
If after 30 minutes it has not progressed – cancel the entire process, then repeat the same steps and it should go through the second time.