The work-around seemed to work for me as well. Tried 2 times with 2 different usb sticks, got 2 failures. Then found this discussion. To me it seems that it fails when "Virtual Disk Service" gets started ...noticed that in the Windows event logs at the time of the failure. Moving the tool to the usb stick and running from there, probably prevents "Virtual Disk Service" from doing the harm because there's an open exe file running from the usb stick. Just guessing, though.
Well, right or wrong, your hypothesis is the first attempt at an explanation I have seen on this thread. Sounds reasonable to me. Thanks for the insight. At least it gives MS a place to start looking in order to fix this problem.