Hyper-V VM creation fails (HCS/ERROR_FILE_NOT_FOUND) even after full repair install, BIOS/chipset update

Use the Hyper-V creation troubleshooting data path first, because the issue is already narrowed to VM creation rather than feature installation.

1. Check Windows Event Viewer for Hyper-V and storage errors.
   • Review system and storage event logs in eventvwr.msc.
   • Filter for recent errors that line up with the failed WSL2/Docker VM creation attempts.
   • The documented data collection path specifically calls out system and storage logs for Hyper-V creation/start failures.
2. Check VM-related logs and error details from the Hyper-V troubleshooting checklist.
   • Query Windows event logs and VM logs for the exact failure point.
   • This is the next supported step when services are running and features enable correctly, but VM creation still fails.
3. Verify file system permissions and ownership on Hyper-V VM configuration locations.
   • Hyper-V VM creation/import failures commonly trace to file system permissions or ownership problems.
   • Compare and correct NTFS permissions on the VM directory.
   • Ensure SYSTEM, Administrators, and Hyper-V groups have full control.
   • Set ownership to Administrators or SYSTEM, enable inheritance, and propagate permissions.
   • Retry VM creation after correcting permissions.
4. Check for registry permission problems if the failure involves virtual networking or worker process creation.
   • A documented Hyper-V failure mode is registry permission issues under: HKLM\SOFTWARE\Microsoft\Windows NT\CurrentVersion\Virtualization\Worker
   • Warning: registry changes are high risk. Back up the registry before modifying it.
   • Compare that key with a working host if available, and verify vmwp.exe or SYSTEM has Full Control where required.
5. Check Hyper-V virtual networking state.
   • Recheck the virtual switch in Hyper-V Manager.
   • Update or re-create the virtual switch if needed.
   • Use:

          Get-VMNetworkAdapter -VMName <VMName>
     

     to review adapter status for any VM object that is partially created.
6. Check for checkpoint or orphaned disk-chain issues if the original trigger was a missing VHDX.
   • Review VM storage for orphaned or missing .avhdx files.
   • Merge or delete unused checkpoints through Hyper-V Manager.
   • Avoid manual file moves or renames.
7. Run OS integrity repair commands even after the repair install, because Hyper-V operational failures can still come from servicing or driver corruption.
   • Run:

          sfc /scannow
          DISM /Online /Cleanup-Image /RestoreHealth
     

   • If the issue is tied to Hyper-V feature state or servicing corruption, these are the supported checks in the operational failure guidance.
8. If the logs point to storage or low-level I/O, collect the documented diagnostics next.
   • mpclaim -s -d
   • mpclaim -v
   • diskpart then list disk, list volume, san
   • Perfmon or Storport traces with logman
   • TSS or WPR logs for IO, storage, failover, or VSS issues

Given the symptoms, the most relevant next checks are:

• Event Viewer system/storage logs
• Hyper-V/VM logs for the failed creation attempt
• NTFS permissions/ownership on Hyper-V VM folders
• Virtualization\Worker registry permissions
• Virtual switch/network adapter state
• Orphaned VHDX/AVHDX artifacts from the earlier Docker/WSL failure

The most likely documented buckets for this scenario are file system/permission issues, registry permission issues, virtual switch/network misconfiguration, or storage-related errors during VM creation.

References:

• Hyper-V virtual machine creation troubleshooting guidance
• Troubleshoot Hyper-V installation, configuration, and operational failures
• Virtual machines are missing, or error 0x800704C8, 0x80070037, or 0x800703E3 occurs when you try to start or create a virtual machine