With XP as a rule as well on the XP Mode the DM lacks the ability to resize any partition to start with let alone the virtual C drive itself. The option for using the DM to resize partitions came with Vista.
For VHDs when using the self expanding option as you continue to add files the partition will actually grow in size over time. Essentially a vhd is a drive image being mounted where you can add files to it like you would with a backup image being mounted as a drive for incremental backups growing in size.
With the fixed disk option you simply run out of space unless following a guide like the one there. Good catch on that one! strollin Now to see if there's one like that for VBox.