The subject behavior will occur if the the VDS (Virtual Disk Service) is disabled.

To resolve this problem:

1. Open a CMD.EXE window.

2. Type the following command and press Enter:

REG ADD HKLM\SYSTEM\CurrentControlSet\Services\vds /V Start /T REG_DWORD /D 3 /F

3. You should receive:

The operation completed successfully.