"Windows Setup cannot find a location to store temporary installation files" when installing Server 2008 R2 on Server 2008

I'm trying to remotely install Windows Server 2008 R2 on a Server 2008 box using an iso image.

When I run the setup I get the error:

Install Windows

Windows Setup cannot find a location to store temporary installation files. To install Windows, make sure that a partition on your boot disk has at least 834 megabytes (MB) of free space.

Error code: 0x80070490

[OK]

There is plenty of space on both C: and D: and I've tried mounting the ISO (using Virtual Clone Drive) from both drives. I've also tried extracting the files from the ISO and running setup but I always get the same problem.

I thought the ISO file might be corrupt but I computed the SHA1 hash to be the same as the one listed on the MSDN download site.

If I had physical access to the machine I'd burn the ISO to a disk but I'm stuck with KVM remote access.

Any ideas?

Make sure that you have the correct drivers loaded for the mass storage device that you are trying to install to.