1. Known issue if you happened to include "FrontPage Server Extensions" component. Did you? If you did, I wonder how you managed to
add that component.
In case you want to read a little bit more about that issue:
2. Does you media where you deploy the image to have enough free space for the FBA to finish?
Or, related, if you target partition is too small to hold the "during-FBA" or "post-FBA" image.
Also, how does your FBALOG.TXT look like?