I tried ALL safe mode options and they ALL failed as above.
I then tried to boot into safe mode and after loading many drivers, it failed with the above 'system halted' message again. The last message out of BIOS was 'Loading Operating System', then a message saying something along the lines of 'System halted due to serious error detected which may cause damage to the system, check newly installed drivers and/or check for viruses'. Rather than un-install AVG, I renamed the file c:\windows\system32\drivers\avgardisk.sys to avgardisk.old and rebooted - disaster!
Having established that when the AVG disk driver avgardisk.sys is installed via AVG, Windows 7 WEI fails consistently, I temporarily disabled AVG and then ran WEI again - it still failed.
