Managing CBS.log files on Windows 2008R2?
Solution 1:
By stopping the "windows module installer" you can safely delete the file, and yes the cab files should be being created, this can happen on Windows 2008R2 when the CBS.log file grows too fast for the compressor to notice (yes, not the greatest way of doing things) or if there is a error during compression. Check the event logs for why this might not be happening.