I had exactly the same problem when trying to upgrade my pre-installed
Vista Business to Ultimate. For me, however, the following workaround
worked and might work for others as well.
1. After booting the first thing that will show up is a boot-selector
where you can choose between "Windows Setup" or "Windows Vista". If you
now do not interact the system will proceed with the setup an show you
that error message. Therefore, chose "Windows Vista" on time and
Windows will start normaly.
2. Open the explorer and browse to your drive C. There you will notice
that there is a second Windows directory called "$WINDOWS.~BT" (maybe
hidden). This is the setup directory which contains the files that had
been copied from the upgrade DVD.
3. Copy the file "C:\Windows\System32\drivers\iastor.sys" to
"C:\$WINDOWS.~BT\Windows\System32\drivers\iastor.s ys" and also to an
external drive like an USB Stick. You will need this later. Write down
the drive letter!
4. Reboot and do not interact when the boot selector shows up. You will
realize that the error message will not show up and the upgrade
procedure will proceed until the next re-boot.
5. After the next reboot you will probably see the same error message
again. It is not, however, as the corrupt file is now identified in the
directory C:\Windows\... instead of C:\$WINDOWS.~BT\Windows\...
6. Now insert your Vista-DVD and allow your computer to boot from it.
7. Select your language.
8. Now, do NOT press "Install". Instead, go to the lower left an click
"Computer repair options" or something similar (in German:
9. You'll be asked for some System Repair Options. Select "No".
10. Now you are asked to select the Windows installation to be
repaired. Deselect any pre-selection by clickig into the white area and
click "Next" (ge: Weiter).
11. On the menu that will show up select the command line (last
12. On the command prompt enter "cd Windows\System32\drivers"
13. Now copy the file "iastor.sys" from your external drive by entering
"xcopy X:\iastor.sys" where X is to be replaced by the drive letter you
wrote down in item 3.
14. Eject the upgrade DVD and reboot your computer.
The upgrade procedure should now proceed with no further errors.
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