“Windows Setup could not configure Windows on this computer’s hardware,” is an error message experienced by some users when they try installing Windows 7 and Windows Server 2008 R2 and received before the deployment failed. This error can occur if you try to install Windows 7 or Windows Server 2008 R2 to an advanced 512-byte emulation (512e) format disk, and that drive is configured to emulate functionality similar to a RAID disk.
To resolve this issue and install Windows 7 or Windows Server 2008 R2 on your computer, follow these steps as mentioned in the KB Article published by Microsoft.
Method 1: Download the appropriate drivers for your hard disk drive:
Download and install the latest driver for your Windows 7 or Windows Server 2008 R2 computer. To do this by using another computer, visit the following Intel website and download the appropriate drivers for your hard disk drive, either 32-bit or 64-bit, to a flash drive, or burn the drivers onto CD/DVD media. The flash drive or media will be used during the Setup phase for Windows 7 and for Windows Server 2008 R2.
Method 2: Change the BIOS hard disk drive setting to AHCI or IDE:
You can change the hard disk drive setting in the BIOS to AHCI or to IDE if the hard disk drive setting is currently set to a RAID configuration. When you set the hard disk drive to AHCI or to IDE, you do not have to install the driver that you obtained in method 1.
Warning This procedure may involve changing your hard disk drive settings in your BIOS. Incorrect changes to the BIOS of your computer can result in serious problems. Microsoft cannot guarantee that problems that result from changes to your BIOS can be solved. Change your BIOS settings at your own risk. Incorrect or corrupted BIOS settings can cause startup problems or shutdown problems.
More details on this KB Article available here.