Windows Setup could not configure Windows to run on this computer’s hardware

I was busy doing some testing with SBS 2008 recently and went to build a new VM from the ISO on my 2016 Hyper-V server.  It failed with an error of “Windows Setup could not configure Windows to run on this computer’s hardware”.  Interesting I thought, maybe it won’t run on my 2016 Hyper-V server, so I then went to build it on my 2012R2 Hyper-V Server and got the exact same error message – you can see it below.

I did some digging and found Microsoft had already documented this issue here.  This basically says that the issue is linked to the underlying virtual hard disk being a 4K sector size and not a 512 byte sector size.  I realised then what the issue was.  I had permitted the New Virtual Machine wizard to create the virtual hard disk itself, which defaults to a VHDX file.  A VHDX file means it is a 4K sector size and not the 512byte sector size.  A VHD file is by default 512byte sector size.  This was one of the reasons for the name format change from VHD to VHDX.

The solution was simple.  Manually create a VHD file for what I needed and use it to replace the VHDX file that the wizard had created.  Voila – it’s now installing.