SCCM 2012 R2 App In Task Sequence Reports Failure Despite Successful Install

Application is installed during an Offline media (USB) OSD task sequence by running a PowerShell script. PowerShell.exe process started at 1:44:45 PM and returned with exit code 0 at 1:45:24 PM. The application is actually installed fine. The installer script had return exit code 0, the MSI installed successfully return code 0, and the MSI product code is correctly detected as installed.

All other Applications in Task Sequence install OK in USB offline.

Note this script runs a silent MSI install, which subsequently launches many external commands via custom action.

Same task sequence is OK on PXE.

SMSAppInstall.exe terminated at 1:44:50 PM with exit code -2147467259 (0x80004005)

Smsts.log shows:

Execution status received: 3 (Application is available for installation )   InstallApplication  02/09/2016 1:44:50 PM   3544 (0x0DD8)
App install failed. InstallApplication  02/09/2016 1:44:50 PM   3544 (0x0DD8)
Setting TSEnv variable '_TSAppInstallStatus'='Error'    InstallApplication  02/09/2016 1:44:50 PM   3544 (0x0DD8)
Setting TSEnv variable 'SMSTSInstallApplicationJobID__ScopeId_E0F7D30F-FC34-4E0F-940C-5DF53B522240/Application_c4a7a7ec-d89b-4222-b65a-b7b876790f6e'='' InstallApplication  02/09/2016 1:44:50 PM   3544 (0x0DD8)
Completed installation job. InstallApplication  02/09/2016 1:44:50 PM   3544 (0x0DD8)
Step 2 out of 2 complete    InstallApplication  02/09/2016 1:44:50 PM   3544 (0x0DD8)
Install application action failed: 'DisplayLink_CoreSoftware_7.9M7x64v2'. Error Code 0x80004005 InstallApplication  02/09/2016 1:44:50 PM   3544 (0x0DD8)

AppEnforcer.log shows:

    Executing Command line: "C:\WINDOWS\System32\WindowsPowerShell\v1.0\powershell.exe" -ExecutionPolicy Unrestricted -File _master.ps1 Install with system context AppEnforce  02/09/2016 1:44:45 PM   3172 (0x0C64)
    Working directory C:\WINDOWS\ccmcache\65    AppEnforce  02/09/2016 1:44:45 PM   3172 (0x0C64)
    Post install behavior is BasedOnExitCode    AppEnforce  02/09/2016 1:44:45 PM   3172 (0x0C64)
    Waiting for process 3756 to finish.  Timeout = 120 minutes. AppEnforce  02/09/2016 1:44:45 PM   3172 (0x0C64)
    Process 3756 terminated with exitcode: 0    AppEnforce  02/09/2016 1:45:24 PM   3172 (0x0C64)
    Looking for exit code 0 in exit codes table...  AppEnforce  02/09/2016 1:45:24 PM   3172 (0x0C64)
    Matched exit code 0 to a Success entry in exit codes table. AppEnforce  02/09/2016 1:45:24 PM   3172 (0x0C64)
    Performing detection of app deployment type DisplayLink_CoreSoftwarex64_7.9M7(ScopeId_E0F7D30F-FC34-4E0F-940C-5DF53B522240/DeploymentType_0e319e56-5719-442d-84b4-1225e1709946, revision 2) for system. AppEnforce  02/09/2016 1:45:24 PM   3172 (0x0C64)
+++ Discovered application [AppDT Id: ScopeId_E0F7D30F-FC34-4E0F-940C-5DF53B522240/DeploymentType_0e319e56-5719-442d-84b4-1225e1709946, Revision: 2]    AppEnforce  02/09/2016 1:45:24 PM   3172 (0x0C64)
++++++ App enforcement completed (40 seconds) for App DT "DisplayLink_CoreSoftwarex64_7.9M7" [ScopeId_E0F7D30F-FC34-4E0F-940C-5DF53B522240/DeploymentType_0e319e56-5719-442d-84b4-1225e1709946], Revision: 2, User SID: ] ++++++    AppEnforce  02/09/2016 1:45:24 PM   3172 (0x0C64)

Inserted reboot and pause before the application as suggested by others online, although this failed to remediate issue.

Tried removing the script install and just creating application with MSI, task sequence failed same error.

Enabled debug logging but didn't find any additional information relevant to this issue in the SCCM logs.

Running the same install script via a Package, instead of via Application works.

What are potential causes of Applications in SCCM incorrectly triggering task sequence failure? What can be done to ensure Applications report success correctly?

Applications are renowned for being a massive pain with OSD - While I've not seen your problem specifically, I have come across MANY weird and wonderful issues caused by using an Application in a Task Sequence instead of a package. (David O'Brien has a really good write up of "Applications vs. Packages", which even includes a section called "Applications tend to break OSD task sequences" - https://david-obrien.net/2014/04/applications-vs-packages-configmgr-package-model-wont-go-anywhere/)

Have you tried/are you able to try converting the Application to a Package and trying it again?