when a Windows 7 system has been sysprepped three times -- KB929828. To overcome this, you will need to do the following:

1) Inside the Sysprep Unattend.xml file located at c:\windows\system32\sysprep, delete skiprearm=1from thesection. In order to edit the Unattend.xml file, you will need to slave the HDD onto a working machine in order to have access to a text editor for editing the file.

2) Under HKEY_LOCAL_MACHINE\SYSTEM\Setup\Status\SysprepStatus\, set GeneralizationState to 7

3) From an administrative command prompt, type the following
msdtc -uninstall
msdtc -install

4) Under HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows NT\CurrentVersion\SoftwareProtectionPlatform\, change SkipRearm to 1

5) disconnect the ethernet cable

6) Rerun the sysprep

Fixing the "A fatal error occurred while trying to sysprep the machine" error