When you attempt to upgrade a Windows NT 4.0 Terminal Server to Windows 2000, you may receive the following, after entering the product key:
Windows 2000 is installed on a drive formatted with the OS/2 File System (HPFS). Windows 2000 does not support this file system. You must convert this drive to the Windows 2000 File System (NTFS) before upgrading.
You don't have any HPFS volumes?
If you type set at a CMD prompt, you will see that the Homedrive environment variable is a lowercase drive letter.
Windows 2000 Setup does not use the Homedrive environment variable when the Terminal Server is in Install mode.
To prevent the error, open a CMD prompt and type:
change user /install
Run Windows 2000 Setup to perform upgrade.