log file showed file read error. Another log file in folder C:\Program Files\Altiris\eXpress\Deployment Server\WAIK\ puts a comment about WinPE reinstall : skipping regenerating file winpe.wim in folder C:\Program Files\Altiris\eXpress\Deployment Server\WAIK\Tools\PETools\x86\
Removed file C:\Program Files\Altiris\eXpress\Deployment Server\WAIK\Tools\PETools\x86\winpe.wim and reinstalled WinPE and this fixed the issue.
Make sure the following policy is disabled: MACHINE\System\CurrentControlSet\Control\FileSystem\NtfsDisable8dot3Name
Fix for peimg.exe unable to access C: drive
If possible, determine what may be preventing peimg.exe from accessing a wim mounted on the C: drive and report it to Symantec support
Change the user's environment variable TMP to a drive other than C: (by default, TMP uses %USERPROFILE%\Local Settings\Temp - %USERPROFILE% is on the same drive as Windows, usually C:) - E:\Temp for example.
Fix for winpe.wim already mounted
Run X86\imagex.exe /unmount C:\Temp\WinPE (replace C:\Temp\WinPE with the path provided in the error message found during troubleshooting)