One of the consequences of being part of the Windows Insiders program is that occasionally you run into a bug so bad that your system doesn't boot. Fortunately, the kernel team was able to diagnose the problem on my machine and develop a fix.
The fix was too late for me, but at least it will be useful to others. In the meantime, I had to reinstall my system. I waited for the fix to be released and copied the build to a bootable USB thumb drive. I booted from that thumb drive and told Windows to install to the partition that held my previous (broken) Windows installation.
And that's where I got the error "We couldn't create a new partition or locate an existing one."
The Setup team told me that Setup wants a System partition, and one way to make this possible is to shrink an existing partition by around 500MB. But my machine already had a System partition. After all, it's being used by the existing Windows installation.
We played around and concluded that Setup was getting confused over which volume was the boot volume, and it may be trying to treat the USB thumb drive as the boot volume and trying to create a System partition on it.
Here's the solution: At the initial Setup dialog box, do not click Install Windows. Instead, press Shift+F10. This will open a command prompt.
Use the command prompt to copy the contents of the thumb drive
to a directory in the root of disk 0.
The drive letter for disk 0 will vary, so let's say it's
and for concreteness,
let's call the directory
Once the contents have been copied,
remove the USB thumb drive,
and reverify that you are on the initial dialog box.
(If you accidentally proceeded past it, then click Back
to get back to it.)
There are actually two Setup programs.
The first one is
setup.exe in the root of the install media.
This is the Setup introductory dialog.
If you click Install, then it runs
which is the main Setup program.
Each Setup program detects that a copy of itself is already running and will hand control over to the existing copy.
This means that running
will not work because it will detect is already-running copy
and hand control to it.
You have to
make sure that you haven't clicked the
Install button in the initial setup dialog,
run the Setup program in the
And don't forget to remove the USB thumb drive before you
Otherwise, it will see the thumb drive and get confused again.
There are other ways to solve the problem,
but this one seemed the most straightforward.
Basically, you first want to boot Windows off something.
A USB bootable drive is most convenient,
but a network (PXE) boot or a bootable CD will also work.
Next, remove all storage drives except the one you want to install from.
That way Setup won't get confused.
And finally, run
sources\setup.exe to get the party started.
It worked for me. Maybe it'll work for you.