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I was getting this error today after creating a new sql service template. It was slightly bizarre as if you checked the VM properties it had a DVD drive with the vmguest.iso injected and ready but the deployment still failed.

I had 2 disks on my first IDE chancel and the DVD and an additional Hard Disk on my second.

I moved the 2 data disks to the scsi channel updated the template and it worked after that….

slightly weird but working now!