Upon plugging in a IP phone we have sitting around this error comes up "extension in use" # to register. when I enter a known extension number and password it reverts back to "extension in use" # to register. Any suggestions

Clear the phone of all of its settings, through the craft menu, then let it boot up again, then log it in using a free extension number assigned to an H323 extension

Make sure you arent trying to login as a digital or analog station...

So a digital phone cant hot desk to a IP?

Yes, you can hotdesk to any extension number, but IP phones are a little different, the "base" extension number is held in the phone set instead of on the station port. Just like a digital phone that is logged out will take on the base extension number associated with that logical ID, the IP phone will take on the base extension number associated with it's 8XXX logical ID