The above is a very annoying error I just encountered while installing a new VM (Windows 7 in this case) under ProxMox with a VirtIO hard drive. After scratching my head for a bit (after all, I had just manually loaded the Virtio drivers to get it to see the hard drive, which it was now and showing the correct size), I searched around and found a page with someone having the same issue.
It seems that the Windows 7 installer isn’t smart enough to tell you to switch back from your driver cdrom/dvd (a virtual one in this case but still) to the Win7 install media so it gives you this very unhelpful & cryptic error message. Once you have switched it back to the install media and hit refresh, it lets you continue on without a hitch.
Yay for vague error messages.