RIS - Setup was unable to format partition

[Zoom7000]

I have always created RIS images using a modified unattended Windows XP CD method found over at MSFN.

Basically, I copy an XP CD on to my PC, use nLite to integrate drivers, updates, applications etc. Insert the RIS files (and Answer file) in the I386 folder, copy to RIS server and away you go! It's always worked no problems and my current out of date image also works fine. However, when I tried to create a new image using the same method I've done for years, it formats the hard drive and then gives me an error saying setup cannot format this partition. Yet, if I create an unattended CD/DVD out of the same source (having removed the RIS files and replace with WINNT.sif) it works fine!

In addition to the mayhem I have copied a vanilla XP image, no integration of nothing at all except network card drivers for my VM and it gives the exact same problem!

Any ideas what could be going on here?