Task Sequence problem after SCCM 2007 to SCCM 2012 R2 migration

Ran into some problem after I had migrated a SCCM 2007 site to SCCM 2012 R2 CU3

When running the Task Sequence I got the following errors in SMSTS.LOG

Empty location for package: _SMSTSXXX000F1 ApplyOperatingSystem

Installation of image 1 in package XXX000F1 failed to complete..

The system cannot find the file specified. (Error: 80070002; Source: Windows) ApplyOperatingSystem

Changing the operating system package properties under Data Access to “Copy the content in this package to a package share on distribution Points” would have been the solution to this problem.