Upgrade to Windows Server 2008 R2

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Upgrade to Windows Server 2008 R2 from Windows Server 2008 with Hyper-V

Before you upgrade.

The upgrade process is not complex however you need to be careful. An important first step is to bring all of your virtual machines into a single state. You should review each virtual machine and establish a clean VM to be migrated. This VM must be in a shut down state. Your snapshots leading up to the current state must be merged since snapshots are not fully compatible.
Method 1

Perform an in-place upgrade of the parent partition from Windows Server 2008 to Windows Server 2008 R2.

Note During the upgrade, the compatibility report will inform you that you must remove the Hyper-V role by using Server Manager before you continue with the upgrade. This is not necessary. However, before you continue with the upgrade, note the following:

* All virtual machines must be shut down before the upgrade. The Saved States feature is incompatible between Windows Server 2008 and Windows Server 2008 R2. If the parent partition is upgraded with any virtual machines in a saved state, you must right-click the virtual machine, and then click Discard saved state to turn on the virtual machine.
* Because the Snapshot functionality uses the Saved States feature, Snapshots are not fully compatible between Windows Server 2008 and Windows Server 2008 R2. Virtual machines will start successfully to the snapshot that was applied when the virtual machine was shut down before the upgrade. This is denoted in Hyper-V Manager by the green arrow under the snapshot that points to Now.

To turn on the virtual machine with any other snapshot, follow these steps:

Note The following steps assume that you have to continue using all snapshots configured for the virtual machine. If you no longer require snapshots, you can delete your snapshots by using Hyper-V Manager, and then shut down the virtual machine for the data to merge with the parent virtual hard disk.
1. Using Hyper- V Manager, right-click the snapshot that you want to apply, and then click Take Snapshot and Apply. This action will take a new snapshot from the currently applied snapshot. This new snapshot will now be compatible with Windows Server 2008 R2. If you select this option, any changes that you may have made to the state of the virtual machine since the last start will be saved.
2. After the new snapshot is taken, the virtual machine will go into a saved state. Right-click the virtual machine, and then click Delete saved state.
3. Turn on the virtual machine.
4. When the virtual machine has started, repeat these steps until there is a single snapshot remaining.
5. When you have reached the last snapshot, take a new snapshot to capture the current state of the virtual machine to have a Windows Server 2008 R2-compatible snapshot.
* After the upgrade, update the Integration Services. To do this, open the Virtual Machine Connection window, and then click Insert Integration Services Setup Disk on the Action menu.

Note On a Windows Server 2008 R2-based computer, the Integration Services for Windows Vista and Windows Server 2008 will be listed in Programs and Features as "KB955484".

Read More methods here hypervhd.com/hyper-v-install-and-upgrade-f24/upgrade-to-windows-server-2008-r2-t1578.html