I can't run powershell to install IIS and Application server... whats going on here?

Question

PS C:\Windows\system32> Add-WindowsFeature -Name Application-Server,AS-Web-Support,Web-Common-Http,Web-ASP,Web-Includes,
Web-CGI,Web-Asp-Net,Web-Net-Ext,Web-ISAPI-Ext,Web-ISAPI-Filter,Web-Http-Logging,Web-Request-Monitor,Web-Basic-Auth,Web-W
indows-Auth,Web-Filtering,Web-Performance,Web-Mgmt-Console,Web-Mgmt-Compat,Web-Server,WAS -IncludeAllSubFeature -Source
wim:D:\sources\install.wim:2
Add-WindowsFeature : The request to add or remove features on the specified server failed.
Installation of one or more roles, role services, or features failed.
The source files could not be downloaded.
Use the "source" option to specify the location of the files that are required to restore the feature. For more
information on specifying a source location, see http://go.microsoft.com/fwlink/?LinkId=243077. Error: 0x800f0906
At line:1 char:1
+ Add-WindowsFeature -Name Application-Server,AS-Web-Support,Web-Common-Http,Web-A ...
+ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
    + CategoryInfo          : InvalidOperation: (@{Vhd=; Credent...Name=localhost}:PSObject) [Install-WindowsFeature],
    Exception
    + FullyQualifiedErrorId : DISMAPI_Error__Cbs_Download_Failure,Microsoft.Windows.ServerManager.Commands.AddWindowsF
   eatureCommand
Success Restart Needed Exit Code      Feature Result
False   No             Failed         {}

Answer 1

"MS Wants us to use powershell AND installation media AND be connected to the internet AND not have a WSUS server... "
Don't quite understand the rant, but that's okay.
I look as connectivity to the internet as a last resort - I don't know that I have ever used it and my labs tend to be completely isolated from the internet.  Connectivity to the internet is not a requirement if you are using the -Source parameter. 
Connectivity to the internet is in lieu of the -Source parameter.  The installation will first check if the files are local - which they are for most cases as they are in the local SXS directory.  If for whatever reason, e.g. they have
been deleted, the installation will look for an alternate location.  If a -Source parameter is specified, it will look there.  If none is specified, it looks to the internet.
If you plan on using the -Source parameter, it has to point to something and installation media is handy.  But whenever I have needed it (the only time I have needed it is for .NET 3.5/2.0) I sometimes I use the media.  Sometimes I have simply
copied the SXS directory from the media and used it without the rest of the media.
A WSUS server has absolutely nothing to do with this.  A WSUS server does not provide 'connection' to the internet for the machine on which you are trying to install.  Connection to the internet means that you can browse the internet from the machine.
The post that aperelli pointed you to did have a reply that may be germane.  You don't mention if this is a core installation or a full installation.  One of the options you have chosen in not valid on a core installation.  Since we don't
know what your environment is, this is a shot in the dark.
Another point is that there could be some sort of conflict of options chosen.  My personal preference would be to break the installation into smaller steps - maybe even a single feature per PowerShell cmdlet.  I don't think you will see any difference
in the amount of time it takes.  Then, if there is some sort of an issue, you would know exactly which feature is creating it.
. : | : . : | : . tim