Again after a little play with minlogon on nLited WXP i discovered that problem with repeating CF setup screen and all other troubles comes from fact that when you logon as system your environment variable list is not including temp tmp paths in the right way you should set temp and tmp variables by hand in My computer>Properties>Advanced>Environment variables.
My working environmet looks like this:
Microsoft Windows XP [Version 5.1.2600]
(C) Copyright 1985-2001 Microsoft Corp.
C:\Documents and Settings\Default User\Desktop>set
COMPUTERNAME=SA
ComSpec=C:\WINDOWS\system32\cmd.exe
FP_NO_HOST_CHECK=NO
NUMBER_OF_PROCESSORS=1
OS=Windows_NT
Path=C:\WINDOWS\system32;C:\WINDOWS;C:\WINDOWS\Sys tem32\Wbem
PATHEXT=.COM;.EXE;.BAT;.CMD;.VBS;.VBE;.
JS;.JSE;.WS F;.WSH
PROCESSOR_ARCHITECTURE=x86
PROCESSOR_IDENTIFIER=x86 Family 6 Model 9 Stepping 8, GenuineIntel
PROCESSOR_LEVEL=6
PROCESSOR_REVISION=0908
PROMPT=$P$G
SystemDrive=C:
SystemRoot=C:\WINDOWS
TEMP=C:\TEMP
TMP=C:\TEMP
USERPROFILE=C:\Documents and Settings\Default User
windir=C:\WINDOWS
In a short - play with environment variables and CF will work with minlogon.
btw the best is to set variables first before even installing .Net framework and CF.