KMODE_EXCEPTION_NOT_HANDLED error shows on target virtual/physical machine

When performing a conversion, the following error message may appear on the target machine:

The above error appears to occur when converting source machines that contain the Update Rollup 1 for Windows 2000 SP4 security update. 

Workaround # 1

To prevent the above error from occurring, the following workaround is advised:

1. Clean up the previous failed conversion (See TID 7920039 for more details)
2. Uninstall the Update Rollup 1 for Windows 2000 SP4 security update from the source machine
3. Retry the conversion

Microsoft is aware of the issue and it has posted a Knowledge Base article about it:

http://support.microsoft.com/default.aspx?scid=kb;en-us;904374&sd=rss&spid=7274

Workaround # 2

Recovery of the VM is possible by performing the following procedures:

1. Boot the target physical or virtual machine using Windows 2000 installation CD and access recovery console
2. Browse to %windir%\system32\drivers\ and rename scsiport.sys to scsiport.old
3. Copy the scsiport.sys file from %windir%\$NtUpdateRollupPackUninstall$\ to %windir%\system32\drivers\
4. Restart the target virtual/physical machine - it should load and continue the configuration service - please allow the target machine enough time to complete the configuration (around 30-90 minutes)

The above article contains a Recovery Console workaround that might help you to recover the Target Machine.

Microsoft recently released Update Roll Up 1 version 2 which doesn't cause the issue above. Microsoft recommends to install version 2.