When you do an in place upgrade of a Hyper-V virtual machine you’ll get a warning that Microsoft Hyper-V S3 Cap may not work after the upgrade and that you need to update the driver prior to the upgrade.This warning is logged to the Windows Compatibility Report.htm.
Microsoft Hyper-V S3 Cap is an old S3 Trio 765 emulated video device and the driver isn’t included anymore so you’ll get this particular warning. This will never give you an issues, all drivers needed are indeed in the install bits. You can safely ignore this and successfully upgrade.
Some people uninstall the device via device manager but basically that’s pure cosmetics & doesn’t really serve a purpose.
This warning is an artifact of the generation 1 virtual machines who still have this device on a PCI bus. Below is a screenshot of a VM with W2K12R2, generation 1. As you can see the Microsoft Hyper-V S3 Cap is perfectly fine. No worries.
As a matter of fact you will not even see this device on a generation 2 virtual machine and we should not see this with an upgrade of those.
I will have to wait on a public preview of Windows vNext to test an upgrade of a generation 2 machine to prove my thinking that this cosmetic error won’t be there anymore.