This occurred when I chose to do both procedures to my C & D drives, the former being the system boot drive, and the software needed to reboot to complete the procedure. After reboot, the software displayed four indicators (sans text), which I surmise represented both drives, with two processes each.
The first two completed in seconds, the third about 15 seconds, and the fourth was still doing something after half an hour. I reset the PC at that point, and that is all she wrote.
I have no less than 31 discs sitting here that I have used to try and fix this the bootup process to no avail. Microsoft provided me with a Sr. Engineer team and they are ready to close the case as unresolved.
My sytem is Windows 7 Ultimate SP1 64-Bit, 12G RAM, many internal and external drives all thoroughly checked with various Windows & Unix-based utilities and there is nothing wrong with the hardware.
I can access all files on all drives but cannot get to the Windows desktop.
Run an ole fashioned, in-place, version to version upgrade by booting the Windows 7 DVD, which is not supported by Microsoft (which does not mean it cannot be done).
In my mind (and possibly only there... ), you would need to discover how the DVD knows that it started the PC when it's booted, and circumvent that by having the DVD "think" it is being launched from the desktop.
I have already experimented with the environment by directing everything toward my C-Drive and my user profile, etc., instead of the environment set by the DVD, but that did not work.
I am guessing that upon bootup, the DVD is writing something to the system boot disk, and when Upgrade is chosen after selecting Install, it reads what it wrote, and subsequently denies the upgrade (it has to be run from the Windows 7 desktop).
Extract the Windows 7 DVD's ISO file and modify the install.wim to include everything now unaccessible on my C-Drive along with fresh EXE, SYS, DLL, etc. from the wim and then recreate it, place it back into the ISO's directory structure that was extracted, recreate the ISO and burn it to DVD.
This is fresh to me so I do not yet have all the details worked out in my mind as to how this would happen. I have also sent this idea to my Microsoft contact.