Defrag your hard-drive, it should work then.
What LDDEFRAG tries to do is to create a single bit of free space to put / "create" the virtual partition on. We've had this problem on and off since the days OSD originally came out (i.e. - with the 7 MB DOS-based image) ... so you can imagine a 150 MB (odd) WinPE image is going to have this potentially more often. A simple defrag does wonders.
This is nothing to do with T60's - I'm working on one and have used it for OSD as well - works fine :).
LANDesk EMEA Technical Lead.
Thanks for the info, I'll give it a try.