A few things I found out from that custom image that must be used within the company:

Image X runs
Ghost runs off the DVD

Not sure maybe this is somehow conflicting with me trying to run sysprep from the ghost console?

But I have never been able to get syspreping to work for Vista using GSS 2.5, and believe me I tried for quite some time. I've always had to sysprep the machine manually using an answer file created with WAIK, and then boot it to the network adapter to gather the image. 

I think I found the solution, I will test it during my break..

The image we use at work on the DVD contains ImageX. What I did was just extract the Ghost image and now will Ghost off of that, reclone, then add sysprep. Will update.

Well this is what happened.

Our custom image that are burned onto DVD's, I took a look at it in My Computer. Saw a folder called /images. Inside were Ghost images, about 6-7 since they are spanned. What I did was compile all of them into one image.

Now when I go into Ghost explorer, the name of the drive present in that image is "Recovery". If I go to a machine that has a fresh untouched imaged PC that has been reimaged with our corporate DVD, I notice a C: PC COE and a hidden partition called Recovery.

Question is does anyone know why I'm only seeing the recovery partition and not the rest?

Browsing in the DVD I noticed imageX is installed and there are no other ghost files.

Ok I've narrowed it down... There are 2 partitions on our corporate DVD. 1 is hidden (Recovery) and 1 is visible (PCCOE).

I imaged the PCCOE partition over, added sysprep fails.
Imaged without sysprep and it passes.

I noticed our DVD also runs imageX, not sure if that has to do with sysprep failing?