I was trying to install WSUS on a 2012 R2 server and kept failing with the following error : Fatal Error: The system cannot find the path specified.
First I thought it is complaining because it cant access the folder content location, them I found that It can create the folder successfully , same for the Database server it was able to create the registry entry for the database server.
when I verified the logs located at C:\Users\%username%\AppData\Local\Temp\2 I found the in the logs that it fails during the IIS Configuration, however the WSUS server is already created and bound to correct port (in my case 8531, and 8530).
On that server I had deleted the default web site with ID 1, as I never use the default site , so I thought it might WSUS requires the default site for the initial setup . Once I had recreated the site I was able to successfully complete the Post installation