I had been stuck on this error for several days. OSD task sequence would fail at "Apply Operating System" with error 0x80070002.
To make matters more confusing the smsts.log did not have this error! I uninstalled and re-installed PXE, WDS, removed and re-added service accounts (validating network access along the way), removed boot and operating systems packages and re-deployed, added additional network and storage controller drivers. All the things from most of the posts about this error.
Then I found a technet forum post by Pa Chou "This error code 0x80070002 was fixed by enabling "Copy the content in this package to a package share on distribution points" on the packages Data Access tab for all my packages."
The fix in my case was checking the "copy the content in this package to a package share" box on the operating system image under the Data Access tap. Updated Content and all fixed.
Source post: OSD TS Error Code 0x80070002 (microsoft.com)