80070002

Configuration Manager OSD Fails with Error 80070002

I noticed in the testing that the Windows 7 images I had created worked just fine but my Windows 8.1 images kept failing at the Apply Operating System step. The package would be downloaded okay from the Distribution Point but would hang for quite some time after downloading it and fail to start applying the image to the disk. The error code in the smsts.log was 80070002 and the message for the code was The system cannot find the file specified. (Error: 80070002; Source: Windows).