Update: After following your suggestion, I got a step farther.
It was able to detect the hard disks in PXE. I got passed my error.
[S]But now there is another error,[/S]
[S]Error now says : *unable to move /images/dev/000c29769fc5 to images/2k3[/S]
This worked for me, the above issue was not encountered when I ran it on a real server. (Only the VM gave the error)
Thanks Bryce for the assistance… and thanks to everyone who helped FOG become the most awesome tool ever![S][/S]