This is not so much a problem rather than an incomplete feature of Vsphere. This issue occurs in all versions of vsphere including 3,4 and 5.
When you try and deploy a virtual machine from a template, the process goes almost to complete but dies around 97% with the following error.
I have seen numerous blogs stating that this is down to the original image being cloned with a CD mounted. This may be true however the actual issue ONLY occurs when you have ticked the box during the template process labeled “ Edit Virtual Hardware Settings (experimental) ”
So, to get around this error make sure you DO NOT select the Edit virtual hardware option. As it says this is STILL experimental.