A new VM was deployed from a template but the VM guest customizations would not complete. The error that was received was:

LaunchDll:Could not load DLL C:\Windows\system32\iesysprep.dll

Solution:

The template was made with Windows 2008 x64. Before the VM was made into a template it had IE9 installed. IE9 was then uninstalled to downgrade back to IE7. It appears when IE is upgraded some more sysprep steps are added for IE. The removal of IE9 did not remove these extra steps and when sysprep goes to call the .dll it is not present.

The additional sysprep steps were removed from the registry:

Navigate to:

HKLM\SOFTWARE\Microsoft\Windows\CurrentVersion\Setup\Sysprep

 Under each of these keys, Cleanup, Generalize, Specialize, delete any value that looks like:

 C:\Windows\System32\iesysprep.dll,Sysprep_Cleanup_IE