@ckasdf This is very strange you are getting an “Access is denied” because setupcomplete.cmd runs in the local system permission context. This is indeed the issue I think. So in my eyes, the hostname changer in the fog service is running fine, but the service is failing to start with the setupcomplete.cmd script thus causing your issue. The screenshots that I asked for pretty much mirror my setup.
So unfortunately I myself cannot recommend anything but to rebuild the image as it seems the local system account is borked. @Sebastian-Roth @Wayne-Workman @george1421 may have other ideas because they are actual wizards.