Second stage creates C:\Documents and Settings\SYSTEM

Seeing Cookies, Desktop, and Local Settings (with History and Temporary Internet Files) in there.
The user profile for SYSTEM should point to "C:\Documents and Settings\Default User" instead, and some special folders should be in %systemroot%\system32\config\systemprofile

This looked fine previously (i.e. there was no SYSTEM folder), but that might simply be because the shell didn't auto-create these folders until the shell merge.