There are a couple bugs to note here. One is with Server 2008 and the other with Windows 7. The Windows 7 bug is that if you choose a Network Location other than Public and then run sysprep, the image will become damaged. I'm not sure why it wouldn't let you choose the Work option, but as a precaution, I set Network Location to Public on everything I work on, even my work and home PCs. So try specifying Public to see if that is any different. Also validate your answer file in WSIM, it is possible that Setup doesn't understand what option you have chosen. The valid options are: Home Work Other <-- Other = Public The bug in Server 2008 is with WDS not clearing out the client database properly. Someone else posted a thread about this.. When I use WDS, I never use the options to add computers into an object, and just let the server approve everything. Although the reasons for this is that my imaging servers have/were/are (I'm not sure what their exact status is nowadays) are on separate networks that do not contain any standard client machines, so all clients that attempt a PXE boot are doing so to get imaged. I haven't had the opportunity yet to setup and operate a WDS Server from within a corporate domain... It is interesting to me, especially MDT 2010 but I'm not licensed to use it