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During the install process we are setting the registry key HKLM\System\Setup!UnattendFile with the value "<cloudbase-init config="" folder="">\Unattend.xml", in order to make sure the cloudbase-init unattend file has the highest priority and to avoid a short path issue. That may be the problem and we are checking now. to confirm/fix this issue.

In the mean time, you could copy your AnswerFile from $LocalUnattendFile to "<cloudbase-init config="" folder="">\Unattend.xml" and try to run "$ENV:SystemRoot\System32\Sysprep\Sysprep.exe" /generalize/oobe /shutdown again, that should work and get your environment working as expected.

In order to know what answer file is used, can you post the contents of these files? C:\Windows\Panther\setupact.log C:\Windows\Panther\UnattendGC\setupact.log

As you cannot attach files and there is no formatting on the comments, I'd suggest pastebin.com or paste.openstack.org .

Thanks.