The hardware needs to be changed from physical machine to virtual machine.
for example, you will have to enable IntelIde, PCI, and disable Intelppm, etc. for the hard disk controllers.
Windows XP uses different kernel images and HAL for single cpu and multiple cpus. In modern times, physical computers are usually dual core, while virtual machine usually only has one cpu. So if you move windows xp vhd without any changes, it won't boot.
There are many more stuff, mouse/keyboard, may freeze without changes, etc.
This change is the challenging part, cloning a disk is now a mudane task on XP and later systems that supports Volume Shadow Copy. On other systems, it's very tough.
We have implemented our own disk snapshot drivers
on Windows 2000/xp/2003/vista/7/2008 (note MS does not have snapshot driver
We have also implemented a disks snapshot driver on Linux 2.6, so can perform hot clone on Linux too