After I go through Welcome (OOBE) and it goes to the Desktop, the first message is 'C:\Windows\system32\systemprofile\Desktop refers to a location that is unavailable. ...'
I should mention that the system I ran your app on is Win 7 64-bit Ultimate. Would this make any difference when installing Win 7 32-bit to a USB HDD?
The problem you mentioned is nothing to do with the PWBoot, it might be a user profile problem.
I think this will be useful: http://answers.micro...41-3aee83d69daa
Also, there are no differences between host system(in which you ran the PWBoot application), the output should be identical.