Behavior seems node specific, we have old node and same job runs fine on this node with and without Install Custom Tools enabled, but on new node seems if Install Custom Tools is enabled in the project, then 'Execute Windows batch command' build step fails:
[CustomTools] - Handle: Starting installation
[CustomTools] - Handle: Label specifics from 'windows' will be applied
[CustomTools] - Handle: Tool is installed at C:\CI\Jenkins\tools\com.cloudbees.jenkins.plugins.customtools.CustomTool\Handle
[CustomTools] - Handle: Setting Handle_HOME=C:\CI\Jenkins\tools\com.cloudbees.jenkins.plugins.customtools.CustomTool\Handle
[EnvInject] - Loading node environment variables.
Building remotely on gimci-vm8 in workspace C:\CI\Jenkins\workspace\test-py-install
[test-py-install] $ cmd /c call C:\Windows\TEMP\hudson4013721381829777457.bat
The parameter is incorrect
FATAL: command execution failed
java.io.IOException: Cannot run program "cmd" (in directory "C:\CI\Jenkins\workspace\test-py-install"): CreateProcess error=87, The parameter is incorrect
at java.lang.ProcessBuilder.start(Unknown Source)
...
at java.lang.Thread.run(Unknown Source)
Caused by: java.io.IOException: CreateProcess error=87, The parameter is incorrect
at java.lang.ProcessImpl.create(Native Method)
at java.lang.ProcessImpl.<init>(Unknown Source)
at java.lang.ProcessImpl.start(Unknown Source)
... 16 more
Build step 'Execute Windows batch command' marked build as failure
Finished: FAILURE