When upgrading from Vista to Windows 7, upgrade process fails and rolls back to Vista - error: \$windows.~bt\windows\system32\drivers\iastor.sys | Status: 0xc0000359 | Windows failed to load because a critical system driver is missing or corrupt. Its because during upgrade process -incorrect version of iastor is referenced resulting in above error, explained Microsoft in KB 2008373.

To resolve:

1. Access Driver Repository Folder under C:\Windows\System32\DriverStore\FileRepository and move any folders that contain file: iastor.inf to a temporary location
2. Search for references to iastor within oem inf files in c:\windows\inf folder - Example Command: findstr /i /c:"iastor" %windir%/inf/oem*.inf
3. Make a note of oem##.inf files reported where ## is a numeral. Move oem##.inf and corresponding oem##.pnf from c:\windows\inf folder to a temporary folder
4. Delete $~bt, $~LS and $~Upgrade folders from c:\ drive if they exist
5. Download and install latest version of iastor.sys driver from Intel on Vista machine
6. Start Windows 7 upgrade process.