Processing configuration Error: The operation is not allowed in the current state. (The VM is in invalid state.)  

When this error occurs during the "Processing configuration" stage of a VMware Replication job, it is most often related to an incompatibility between the VM being replicated and the destination ESXi host.

For example, when attempting to replicate a VM from a host/cluster running vSphere 7.0 to a host running vSphere 6.7, the error will occur because the source VM's Compatibility Level (also known as HW Version) is incompatible with vSphere 6.7.

Investigate

Within a vSphere Client, review the Compatibility level reported by the VM added to the Replication job and ensure that the ESXi host added as the destination is compatible.

*If the destination ESXi host is running a version compatible with the source VM's compatibility level, please collect logs and open a case with Veeam Support to continue the investigation.
 

Resolve

The VM incompatibility can be resolved in the following ways:

• Upgrade the target ESXi host to the same version or higher than the source ESXi host. (Recommended)
  
  or
• Reconfigure the replication job to use a destination ESXi host that is running a version compatible with the VM.
  
  or
• Downgrade the compatibility level of the VM being replicated to be compatible with the destination ESXi host version.
  Reference: VMware KB1028019: Downgrading the virtual machine hardware version in ESXi