Update: reinstalled hyper-v from scratch and is now working.
Running Hyper-v standalone 2008R2 with latest updates. Creating a new VM with 1 gig memory, 2 nics(not emulated), 30 gig hard drive space(not dynamic). I have no issues installing lastest stable 8.1 release with the same settings except for nics are emulated. I have also tried using emulated nics and get the same error on 8.163. I have also experimented with 1 nic, larger and smaller hard driv sizes, same error everytime.
Snip of error from log...
system: returned with exit status 1
END screen 'hook_local'
The preinst hook failed
helper.c:1139L ERROR: unmount: /dest: Invalid argument
END task 'configuration'
START task 'fail'
START screen 'fail'
START screen 'support'
START screen 'view log'
