OK...
Solved the problem. It was a drive partition recognition issue. The installer created partitions on the internal m2 drive, but then tried to install on the usb stick.
Here's how I solved it:
1) Booted to usb installer
2) Started diskpart (shift-f10 to get a command prompt)
3) cleaned the internal drive - removing all partition data
4) converted to GPT - so that it could boot in utfi mode
5) CREATED a small 10GB partition on the internal M2 drive, formatted it as ntfs, and gave it a drive letter. Left remaining space on internal drive as 'unallocated'
6) XCOPY'd the installer files from my usb stick to the new partition
7) Rebooted the system without the USB stick plugged in. The installer booted from the internal drive
8) Installed windows. YAY!
9) Rebooted - and it booted to the installer again, because the partition I created earlier was still the first boot partition in the list
10) Used diskpart to reformat the small partition I created earlier - so it would no longer be a boot option
11) Rebooted one more time and everything worked
The installer was able to boot to the partition on my internal disk and started normally. When I installed windows on the unallocated space on the drive, the installer did all the right things and windows installed! Having only one drive in the mix (no usb) was the main issue. I suspect that it's because the m2 drive is the only internal drive in my system.
The key was finding a method that took the decision of where to install out of the installer's hands. As long as the USB drive was the primary drive the installer failed to find the correct place to install windows