Error message when you try to upgrade a Windows XP-based computer to Windows Vista: "Windows installation encountered an error and cannot continue."

When you try to upgrade a Windows XP-based computer to Windows Vista, you may receive the following error message during the upgrade process: When you click OK, Setup restores Windows XP on the computer.

Additionally, an "Error 112" message may have been logged in the Setupact.log file during the upgrade process. This log file is located in the %SystemRoot%\Panther folder. This "Error 112" message indicates that the volume is out of disk space.

This issue may occur if the size of the EFS encrypted files exceeds the free disk space that is available on the disk volume. When you upgrade to Windows Vista, a temporary copy of the encrypted files is created during the migration of the user profile. The upgrade process requires at least two times the free disk space that is available on the disk volume. If Setup cannot find the required free disk space to create a temporary copy of the files on the disk volume, the upgrade process cannot continue.

To work around this issue, disable encryption of data files and folders in Windows XP, and then try to upgrade to Windows Vista. To do this, follow these steps:

1. Click Start, and then click My Documents.
2. Locate the encrypted files or folders that you want to modify.
3. Right-click the files or folders that are encrypted, and then click Properties.
4. On the General tab, click Advanced.
5. Click to clear the Encrypt contents to secure data check box, and then click OK two times.
6. Click Apply the changes to this folder, subfolders and files, and then click OK.
7. Try to upgrade to Windows Vista.