Sysprep Fatal System Error (Windows 7 64bit)

I recently ran into this error when I was trying to customize a Windows 7 64bit image that had been created by someone else. After spending a few hours on Technet below is what has fixed the problem for me every time I’ve encountered it.

1. Start -> Run : msdtc -uninstall (wait few seconds)

2. Start -> Run : msdtc -install (wait few seconds)

3. Restart the machine

4. Check the registry for the right registry keys values
Setting HKEY_LOCAL_MACHINE\SYSTEM\Setup\Status\SysprepStatus\GeneralizationState to 7 / CleanupState to 2
and
Setting HKEY_LOCAL_MACHINE\Software\Microsoft\Windows NT\CurrentVersion\SoftwareProtectionPlatform\SkipRearm to 1

5. Rename or delete C:\Windows\System32\sysprep\Panther

6. Run sysprep (sysprep /generalize /oobe /shutdown)

*** Make sure to do all steps each time you attempt a sysprep.

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