Everyone deploying Windows XP SP2 with BDD 2007 (or plain Windows PE 2.0) should read this, it sure caused me some major pain during the last week…
When using Windows PE 2.0 for scripted installs or sysprepped images of Windows XP SP2 the setup fails, rebooting/hanging on loading mup.sys or appears to have HAL or other driver issues…
Information from Microsoft about the issue
Windows PE 2.0 has a new way of writing partitions to the disks compared with Windows PE 2004/2005. Some BIOS (like HP D530, HP DC5000, HP DC5100) is not compatible with this method. However, there is a workaround...
Fix Windows PE 2.0 by adding the following registry keys before running diskpart.
Windows Registry Editor Version 5.00
If you are using BDD 2007 Lite Touch, just add a custom action to the task sequence, see below