I was working with a client who wanted to use Group Policy to install the ConfigMgr client.
They had created the Group Policy with the client installation settings and had CCMSETUP.MSI as an Assigned Application.
Unfortunately the client was not getting installed. A quick look in the event log on the workstation that this group policy was being tested on showed the %%1274 error.
I have seen this before, it is to do with asynchronous policy processing.
You need to change the following group policy setting.
Computer Configuration Policies Administrative Templates System Logon Always wait for the network at computer startup and logon – enable this setting
This a useful article to read regarding the setting and why it is disabled http://support.microsoft.com/kb/305293
That's really a good catch David! Very helpful