We have 24 sites and I'm having an issue with just one and I'm not sure what else to look at. I've tested in vmware and hardware. The task sequence applies the wim file and then hangs for a bit, then comes up with an error 0x80070002. The smsts.log time never changes and the event is not recorded and the stamp date on the log does not change. Once you reboot you get a vanilla windows 7 installation. I have also redistributed the os image to the site and it's in the smspkgz$ directory.