Here and in other places, I note that people say that this method exacts only a tiny performance penalty, but I'm noticing extreme and crippling lagging when in the booted VHD because the disk activity light is solid red--on a fresh install (it's not indexing, either, since I disabled it). Performance Monitor in the VHD shows that the VHD is being written to and read from constantly, which makes sense to me, since everything is in the VHD, and Windows naturally reads and writes a lot. Yet, as I said, others don't seem to be seeing this issue.
You might think that I have the VHD located on some kind of awful drive, but it's a 7200rpm drive that works perfectly well when (at other times) I use large VHDs with a program like Virtualbox. Or maybe that my system is slow, but it's a Core i5-2500K with 8GB RAM. Or that the VHD isn't fixed, but it is, at 25GB.
Device Manager in the VHD looks fine. Is there something basic that I'm overlooking or something else to check?