With some help from my colleague, Reg, I did manage to reach a point where I could install server core and then run install-windowsfeature to completion without an error.

HOWEVER, after rebooting when the command had finished, all I got was a DVD light flashing and a black screen (for 24 hours) so something still doesn’t work.

The reason the original command failed, was we think due to patching the server image and not the media, as explained by CGomez in http://community.spiceworks.com/topic/365701-impossible-to-install-gui-on-server-core-2012-caveats

It’s a poor show from Microsoft that such a basic set of steps leads to such a complicated error.

P.S. 01-Jun-14
I forgot to mention that the commands in the blog above did work. What didn’t work was the subsequent reboot and that was due to VMWare tools which don’t work on the combination of Workstation 8 and Server 2012R2.

Adding to Server Core