You have to get/activate the license as well. Not sure about v. 10, but for 9.3x educational, there's a Desktop Administrator' icon under the ArcGIS folder under Start -> All Programs. Click that, then go through the steps to download (or activate) the license. Not sure offhand which of the options in Desktop Administrator you go through, but you can probably figure it out.
What about when using Model Builder? I am trying to incorporate a custom extension into a model, but when I try to double click on the tool to change the inputs, I get the same error (a dialog pops up with "error 000824" saying the tool is not licensed).
bjhunter - When publishing to server you need to have the license for Server. You have to have the Spatial Extension for server to provide that capability. The desktop license only applies when working in Desktop.
sanjeeva - For your publishing are you using a Windows Server? I see that the Schematic Extension will only work on a Windows server per the above chart. If that is the case,then I urge you to create a Support Incident to look into it further.