Key already activated on a different account

It's actually something that happened to me as well.
If purchased on a bundle site the GA creator still could get in contact with the bundle site's support to exchange it with a working one. Sometimes they won't be able to help 'cause they ran out of replacement keys (e.g. if the bundle was too long ago) but this is quite uncommon except for humble which are aware of giveaway sites and recently tend to reject replacement requests if they believe you're either using a GA site or trade stuff.
He could also delete the GA with your agreement and the help of the SG support if you don't want to wait and rather try your luck on another raffle.

Last option would still be to mark it as "not received" after 7 days.

One of my giveaway winner reported the same, i contacted the bundle site, got a replacement key and all went well. In another case, i didnt contact bundle support, i went ahead and got the game from steamtrades and provided him the key. Usually, if its a bundle game, it shouldn't be that hard to replace the key either via trade or via contacting support .

Ask GA creator again if they have another key, and if they don't, you ask them if you can mark as not received before 7 days (maybe keep proof with screenshot, you never know), or if they want to delete the giveaway. So you can enter giveaways for that game again.

Do I wait till the grace period (7 days) has passed and mark the key as not received?

Yes. In the meantime, leave a message in the giveaway that the key was a dupe, in order to give the creator a chance to replace it if he wants, or to possibly delete the giveaway (if you're okay with it).

Ok, thanks for the advice. I've let him/her know the key doesn't work. I'll just wait the 7 days and if no solution turns up I'll just mark as not received.

Since the creator doesn't have a new key and you believe it was an accident what you could do is send a ticket in to support and say that you don't mind if the GA is deleted. Explain on the GA to the person you won it from that you are going to give permission to support to delete the GA.

It happens, but doesn't make it less bothersome for both sides, that's true. Various courses of action are possible:

1. If you believe there is good will, wait the 7 days (you lose opportunities like you said, but it allows time for the GA creator to at least try to contact the store he acquired the key in to revoke the original and issue a new one)
2. If the GA creator has no other valid key, mutually agree to delete the GA, post this intention in the GA's comments and submit a Support ticket to do so
3. After the 7 days, if nothing changed, mark as "Not received"... nothing to do but move on, and enter the remaining giveaways for that title

I had this happen once where every Humble Gift Link from a particular bundle that I gave away had already been claimed somehow (3 GAs from the same bundle). The winners contacted me, I contacted HB support, HB support gave me new gift links, which I gave to the winners. Took a few days longer, but it was resolved pretty amicably

If the GA creator admits to the mistake and doesn't want to do anything about it, ask him to request a ticket for immediate deletion of the giveaway. (He shouldn't have any reason to refuse that - if he does, you have a legit reason to report him.) As soon as support deletes it (usually within 48 hours), you should be free to enter giveaways for that game again. That way you are not punished for 7 days for a fake giveaway.

I'm the creator of the GA, i'm sorry but i work on the day...
So for the GA, it's a indie gala free game, i don't want to ask them for a new key especially that i don't win level for my GA!
It's a totally altruistic gift!
My first intention was to give him another game but when i see that... hmm... i don't want to be nice!