Have to agree with your statement regarding MS deployment quality control. Although, there is the thought that Windows needs to work across an almost infinite number of HW combinations across many years of component evolution.
Having said that, "The source could not be found" implies that the file is just not there. That suggests that explicitly specifying the source file from a known good source (.iso) might solve that problem. Here's a link to a description from this website that describes the process. That's also the syntax I borked previously but now it's relevant ;).
You'll need an iso Windows source that's relatively recent or you'll need to download one.