[pnord]

Getting the same thing here. Results were inconsistant when the image was 10GB. But after a few tries, I was able to make it work.

Now the image is 54GB and…

[…]
cp: /Volumes/Untitled/test/Image_809280832.nbi/mnt/mach_kernel: No such file or directory
2007-09-28 08:33:25 -0500
hdid: attach failed – No such file or directory
2007-09-28 08:33:35 -0500 Unmounting image…

2007-09-28 08:33:35 -0500 Error creating Image. This image is not usable

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But I think I’ve found a solution here:
http://discussions.apple.com/thread.jspa?messageID=4688765

You need to modify /Applications/Server/System Image Utility.App.Contents/Resources/.preflight and .preflightDVD.

Change the “stretch” parameter in three places to a larger value. I set mine to 100g.

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