You can't upgrade native VHDs or Windows To Go sticks.

The VHD limitation is listed at the bottom of this page:

http://technet.microsoft.com/en-us/library/dd440865%28WS.10%29.aspx#BKMK_rest

Upgrading the operating system booted from a VHD. If you boot from a VHD, you 
cannot upgrade the Windows version in the VHD to a newer version.

Thanks,
-Michael

From: [email protected] [mailto:[email protected]] On 
Behalf Of Trevor Sullivan
Sent: Friday, September 20, 2013 1:38 PM
To: [email protected]
Subject: [MDT-OSD] Windows 8.0 to 8.1: Native VHD Boot

Hey folks,

I'm a little confused with what's going on around the Windows 8.1 stuff. 
Initially I thought this was going to be analogous to a Service Pack, since 
after all, it's still called Windows 8. Unfortunately, I went to upgrade my 
workstations when the RTM media became available, and got an error saying that 
I couldn't upgrade a Native VHD boot system.

Has anyone else run into this problem? The Microsoft TechNet documentation for 
Native VHD Boot doesn't say anything about the inability to perform operating 
system upgrades, otherwise I probably would not have gone down that route. Of 
course, since the information wasn't there, I couldn't have possibly made that 
decision a year ago, when I initially installed Windows 8.

Cheers,
Trevor Sullivan

I realize this document is for Windows 7, but similarly applicable: 
http://technet.microsoft.com/en-us/library/gg318048(v=ws.10).aspx

Limitations
The following are limitations with native VHD boot in Windows 7 and Windows 
Server 2008 R2:

  *   BitLocker. Although you can place a VHD on a partition that is enabled 
with BitLocker(tm) Drive Encryption, it is not possible to boot from that VHD. 
Enabling BitLocker on the operating system within the VHD is also not a 
supported configuration.
  *   Manual image creation. Creating VHD images is still a manual process. 
However, you can configure VHDs to align with the existing image engineering 
methods in your organization (creating a standard image, editing its 
configuration, and so on). For example, you can apply an image to a VHD with 
the same method as you would apply it to a hard disk drive.
  *   No setup configuration during deployment. There is no setup support while 
deploying a Windows image to a VHD. That is, you can only apply an image 
directly to a VHD; you cannot use setup to configure the operating system to be 
installed on a specific partition.
  *   Location of differencing VHDs. When using differencing VHDs, all VHD 
files (the parent files and the differencing VHD itself) must be stored on the 
same partition.
  *   Supported editions. You can only use VHDs that contain Windows 7 
Enterprise or Windows 7 Ultimate edition for native VHD boot. However, all 
editions of Windows Server 2008 R2 are supported.
  *   Hibernation. You cannot hibernate an operating system that runs on a VHD. 
However, sleep functionality is available.
  *   Windows Experience Index. The Windows Experience Index cannot be 
calculated for VHDs that are configured for native boot because of the way disk 
performance is measured. This means some features, such as the Aero(r) desktop 
experience, will not be automatically configured based on the index of the 
VHD's operating system. However, you can use the Winsat command-line tool to 
manually configure these indexes, except for the index for the disk data 
transfer rate.


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