I figured out what is going on here. This has to do with the UAC filtered tokens and running the commands when logged in locally vs remotely. Invoke-VMScript is looked at as a remote connection on the virtual machine and when you connect remotely to a Windows machine with a user that is in the local admin group, you are granted the admin token as described here http://www.teamshatter.com/topics/general/team-shatter-exclusive/connecting-remotely-with-administra...
I further tested this out by running that same commands through a remote powershell session to the target vm using a domain admin and I did not have any permissions or elevation problems. With a remote powershell session I am seeing the same behavior I am seeing with Invoke-VMScript.
Mystery solved
There are multiple ways to connect to a remote machine using Administrative privileges and avoid UAC filtering:
1. Connecting remotely as the local built-in Administrator account
2. Changing registry value “HKLM\SOFTWARE\Microsoft\Windows\CurrentVersion\Policies\system\LocalAccountTokenFilterPolicy” to 1 to turn off UAC globally on the system
3. Using a non-domain local account that is in the Administrators group of the target computer, with UAC adjusted to “Never notify” (this can be done in the UI, or directly in the registry as explained in MSDN Library**) to prevent filtering for that user. The best practice is to create a dedicated local user group or account that will be used for connecting remotely.
4. By connecting remotely using the domain account, the UAC-based problems can be eliminated. In situations when the domain account is in the local Administrators group on the target machine, UAC allows all execution to be done under administrative token – not stopping the execution.
Filtered Token.
When a user with administrative rights, other powerful privileges, or a specific group membership logs on, the Windows operating system creates two access tokens that represent the user account. One has all the user’s group memberships and privileges, while the filtered token represents the user with the equivalent of standard user rights. A filtered token is used to run the user’s programs by default. An unfiltered token is associated only with elevated programs. An account that is a member of the Administrators group and gets a filtered token at logon is called a Protected Administrator account.
When an administrator logs on to a computer that is running Windows 7, Windows Vista, Windows Server 2008 R2, or Windows Server 2008, the user is assigned two separate access tokens. Access tokens, which contain a user's group membership and authorization and access control data, are used by the Windows operating system to control what resources and tasks the user can access.
UAC
Unlike earlier versions of Windows, when an administrator logs on to a computer running Windows 7, Windows Vista, Windows Server 2008 R2, or Windows Server 2008, the user’s full administrator access token is split into two access tokens: a full administrator access token and a standard user access token. During the logon process, authorization and access control components that identify an administrator are removed, resulting in a standard user access token. The standard user access token is then used to start the desktop, the Explorer.exe process. Because all applications inherit their access control data from the initial launch of the desktop, they all run as a standard user.
