Windows 10 Media Creation Tool, how does it work?
Solution 1:
It definitely does download the data necessary. I know because I used it only a couple of days ago and it definitely spent about 2 hours in the "downloading" stage using up my internet bandwidth.
If you have just recently upgraded the copy of Windows on your current machine, in the last month or so, then you may still have the relevant install files downloaded and it should use these instead.
It should only use your local files if they are actually the current version.
In either case the download will set up the files in either a $WINDOWS.~BT or a $WINDOWS.~WS directory in the root of your system drive. If you want to know more about those directories then HowToGeek has an article What Is the $WINDOWS.~BT Folder, and Can You Delete It?.
Solution 2:
Download Windows 10 Media Creation Tool (17.5 MB) version 10.0.15063.0:: http://go.microsoft.com/fwlink/?LinkId=691209. This tool is an 32bit excutable file but really a cabinet file (.cab). So one can easily open that executable file like a compressed file in WinZip or 7zip. Here is VirusTotal link. The processes are;
Files Creation and Logging:: At first execution of MediaCreationTool.exe, it creates some folders in System Drive like $Windows.~WS, $WINDOWS.~BT & ESD. It also creates log files in C:\Windows\Logs and extract itself in C:\$Windows.~WS\Sources folder. Then it logs your PC Windows details in "C:\$Windows.~WS\Sources\Panther\setupact.log" and send it to Microsoft. The data is read from
HKLM\SOFTWARE\Microsoft\Windows NT\CurrentVersionregistry. Open setupact.log file in any text reader and you can see what type of data is sent to Microsoft server. See more How-To Geek link.Connection and Files Download:: It downloads a Products_20170317.cab file from http://go.microsoft.com/fwlink/?LinkID=841361 (for Creators Update). This link written in SetupMgr.dll file in that MediaCreationTool.exe (treated as .cab file). In that Products_20170317.cab file, there is a Products.xml file. Then it reads that XML file, find a ESD file link matching your language (like en-US for English), downloads that encrypted ESD file in C:\ESD folder.
Convert ESD to ISO:: After downloading the required ESD file, it reads the encryption key from Products.xml file to decrypt that ESD file. Now it converts ESD to ISO file. See more GitHub:ESD-Decrypter.
N.B: This process is for Creators Update version 1703.