When you configure a server as a Distribution Point Config Mgr tries to use all available drives. This is not a good idea. You do not want Config Mgr to be able to use C: drive.
Create a blank text file and save it in the root of the C: drive as NO_SMS_ON_DRIVE.SMS.
Now configure the Distribution Point and check progress in the distmgr.log file. Note that Config Mgr detects the file and chooses to ignore the drive.