What if? System Volume Doesn’t Meet Windows Vista Installation Criteria
Although Microsoft has boosted Windows Vista's enhanced installation process to an apex of the operating system's evolution compared to what Windows XP has to offer, the model is not without its occasional glitch.
The company informed that in certain scenarios, Vista will present the following error message upon deployment: "Windows is unable to find a system volume which meets its criteria for installation."
"You experience this symptom if the following conditions are true: in the BIOS, a universal serial bus (USB) removable device is set as the start device, or the USB removable device is set to a higher priority than the first hard disk drive in the start order; you attach a non-bootable USB device to a USB port before you start the computer and you try to install Windows Vista from DVD installation media," Microsoft revealed in Knowledge Base article 938984.
Obviously, the USB device is at fault here. Microsoft provided two workarounds for the issue. The first is the simplest and it only involves removing the USB device. Plugging the removable device after the installation is on its way will no longer affect the process. Additionally, users can also modify the BIOS configuration, so that the new settings will attribute a lower priority to the USB device than to the system's HDD and DVD drive.
"This issue occurs because the Windows Vista installation must be able to write to the boot volume of the computer, and the boot volume must be non-removable to prevent later removal of the boot device. If the boot device were removed, this would make it impossible for Windows Vista to start. A computer is restarted several times during installation. Because the BIOS reports the USB device as the boot device, and the USB device is removable, Windows Vista Installation cannot continue. This is by design," Microsoft explained.
Microsoft, Windows Vista, System Volume, Installation, Knowledgebase
Source:→ softpedia
I agree with the above statement it's bad design, I hope windows 7 changes this.
No way is this "by design" ... this is a bug, plain and simple. This bug prevents you from installing Windows on non-removable internal hard drives when you have a USB device plugged in. What does one have to do with the other?
The explanation above is saying that Microsoft is trying to prevent you from installing Vista on a removable USB drive. Fine. But the symptom of the bug is that you can't install Vista on an internal drive, if you have a USB device plugged in.
If you know the issue, it's a simple workaround -- unplug the USB device -- but if you don't know about this peculiar quirk you could spend hours battling this problem. Considering how vague and inappropriate the error message is (why doesn't it say "Unplug your USB devices and reboot" instead?) I imagine people have spent quite a bit of time on this bug. I know I have!