MS has never bothered to explain why they suddenly decided in 24H2 to replace the default Setup client. It's probably related to BitLocker security and requiring WinRE.
New or "Modern" Setup is essentially what happens when you're on a live system and run an in-place upgrade as SetupPrep. For a clean install on a blank disk, it actually creates an empty Windows.old folder so it can pretend it's an "upgrade".
You can find online threads where IT admins complain "but my updated install image worked for 23H2, why doesn't 24H2 work?". And if you switch back to the legacy client, it works again without any user changes.
Modern Setup is known for these differences:
- Requires WinRE.wim not be missing from your image, and you must have a recovery partition if using a disk layout.
- Requires Manual Setup component as a dependency.
- Lists more disk devices than before in the Disk Layout screen (including the USB drive you're installing from??).
- Creates an empty Windows.old folder. If you're performing sysprep, don't forget to remove Windows.old before you generalize or capture the image.
- Errors out when installing some sysprepped images, but doesn't really tell you onscreen why it doesn't like them.
- May not like some unattended Run commands, which are logged as executed, but don't exactly do what they're supposed to.
- Because it runs as an "upgrade" experience, your install progress indicators are different.