"No Valid System Partitions Exist" During Setup on Compressed Drive

When you are installing or upgrading to Windows 2000, you may receive the following error message even if the boot partition is not compressed:

This behavior can occur if a drive contains a partition that has been compressed with the compression tools included with Microsoft Windows 95 or Microsoft Windows 98. These compression methods are not supported by Windows 2000. When Setup detects the presence of such a compressed drive, it assumes that any installation would be invalid.

Remove compression from all partitions before installing Windows 2000.

Microsoft has confirmed this to be a problem in Microsoft Windows 2000.