I have installed exchange 2007 trial edition(Version 8.1 Build 85.0: Service Pack1) on Server 2008. I have my Technet product key but their is nooption to enter the key in the Exchange Management Console as per the docs I could find. I have tried the Exchange Management Shell Set-ExchangeServer as well but it tells me the productkey is invalid. I'm stumped?

Probably b/c sp1 is still beta and your running a trial version. You don't need a prod key. It'll be dead in 90 days anyway :-)

If you're using the 32 bit version of Exchange 2007 then there is no option for entering the product key. This is only possible with the supported 64 bit version of Exchange