It’s been over 4 years since I wrote about the duplicate SID issue in SID error on cloned Virtual Server / VPC / VMWare OSes. I recommended using the NewSID utility from Sysinternals to fix the cloned machine.
Hyper-V wasn’t around back then, and looking back it seems incredible that many of us survived without it (or your virtualization platform of choice).
Since then, I’ve only used sysprepped images, and the increasing reliance on virtual machines has translated into a time-saving and efficient method of creating cloned VMs at short notice. Using a sysprepped base image and differencing drives makes life incredibly simple, and even if you don’t using differencing drive it works quite well. I highly recommend making at least one more copy of the base image and making the file read-only.
As far as the NewSID utility goes, Mark Russinovich recently posted about retiring it. More in The Machine SID Duplicate Myth.