To deploy an MCS image to Azure, you decide to use the Azure connector in App Layering.  This produces a virtual disk that is primed to run through Windows Setup.  You attach it to a VM, power it on, and find that Windows Setup never completes.  If you look at the console screen shot in the debugging page in Azure, you see an image like this:


That is a black screen that says Getting Ready, with a CMD (command prompt) window titled ERROR HANDLER, at the path C:\Windows\system32\oobe.  This means Windows Setup failed.  You can download the VHD and open it up to read \Windows\setupact.log, \Windows\panther\setupact.log, \Windows\logs\CBS\cbs.log, but that won't help too much.

As of App Layering 1812, there is now a specific MCS for Azure connector, which changes how machines are deployed in Azure.  Instead of setting the machine to run through Windows Setup, the virtual disk is deployed as-is.  This allows it to boot normally, and be prepared for MCS properly.  Use the MCS for Azure connector instead.

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Problem Cause

The way Azure machines run through Windows Setup seems to be different from how they run through Setup normally.  We have seen sometimes that individual layers can somehow capture data which causes Windows Setup to fail because it's looking for the wrong version of some system files.  Again, this doesn't happen outside of Azure.  Since we don't really understand how Windows is determining which exact assemblies to use, we can't figure out what might be getting captured wrong in the layers.  Windows Setup is the only function that has this problem, so using the MCS for Azure Connector to deploy a machine that does not go through Windows Setup is the appropriate solution.