dmex

Heres another way of creating a bootable VHD..

1. Boot Windows 7 DVD
2. Choose Windows Repair
3. start CMD
4. Run Diskpart
5. Create vdisk file=c:\windows7.vhd maximum=100000
6. select vdisk file=c:\windows7.vhd
7. attach vdisk
8. exit Windows Repair (without Reboot)
9. Install Windows 7 to this surfaced VHD
10. Reboots and boots Windows 7 from VHD

UPDATE

See tutorial here - Virtual Hard Drive VHD File - Create and Start with at Boot