Recently, I have seen many people inquiring about this error regarding the Media Creation Tool. I myself got this error when I try to create a bootable USB drive (aka Create an Installable Media).
Here's what I tried:
Reformatting USB drive to FAT32
Tried to locate and run Setupprep.exe (I couldn't find this file in C:\\$Windows.~BT\\Sources or anywhere)
Change Startup Type of Update-Related Services (Startup Type: Manual -> Automatic)
Uninstalled and Reinstall Windows 10 Media Creation Tool
Made sure my USB is above 8Gb as instructed by the tool (it is 15Gb)
The Fix (for me at least):
1. Download the Windows 10 Media Creation Tool directly into the USB drive that you want to use as a bootable device (meaning you download the Tool into the same USB you chose to use as an Installation Media). If you already downloaded the tool on your PC's Desktop, copy it into your USB.
2. Run the Tool directly from your USB, meaning you open File Explorer, locate the MediaCreationTool.exe in your USB and double-click to run it.
The installer should then create an Installation Media/Bootable USB.
Hope this helps!