Here is what seems to be your problem. As you posted:
Microsoft DiskPart version 6.0.6002
Copyright (C) 1999-2007 Microsoft Corporation.
On computer: ADAPP02
DISKPART> list vol
Volume Ltr Label Fs Type Size Status Info
---------- --- ----------- ----- ---------- ------- --------- --------
Volume 0 F DVD-ROM 0 B No Media
Volume 1 D System Rese NTFS Partition 100 MB Healthy System
Volume 2 C NTFS Partition 136 GB Healthy Boot
Volume 3 E Apps NTFS Partition 272 GB Healthy Pagefile
If I'm reading this right, you've somehow managed to get the flags swapped between the System Reserved and the actual System partition. Windows won't let you change the drive letter of the System Partition, which in this case is the wrong partition. There isn't a way to change this short of hacking the partition table directly. This was set on install.
This is actually a dangerous config, since it's probably possible to change the drive letter of the drive that has the \Windows directory on it. That's supposed to be the drive flagged System, but that patently isn't the case here. Fixing this will require reinstalling your Server 2008. Or if that's not possible, you'll just have to live with the fact that %SystemRoot% is not C:\Windows.
No I don't know how it happened. It looks like a bug to me. If you have the option, calling Microsoft about it would be a good idea.