How should I convert a physical drive to a VHD for use with VirtualPC?

I have the hard disks from a PC that was happily running Windows Me until is it suffered an unknown hardware failure. The drives are intact, and can be mounted and read on other PCs.

We have data backups, but there is licensed software installed that may not be possible to migrate to newer versions running on a more modern platform making the idea of just booting a virtual image attractive.

Is it possible to make VHDs from the drives such that I can boot them in VirtualPC?

If not VirtualPC, would it be possible in any other virtualization tool?

Edit: Some more details....

The system was running Windows Me, but upgraded from Windows 95 (or possibly 98). It can't have been more than a Pentium II, but I will have to look at the motherboard to confirm that. There were no "exotic" devices installed, and nothing beyond the usual legacy stuff that would need to survive into a virtual machine.

The licensed software did not have a dongle, so I won't need to worry about virtualizing a physical dongle of some kind. Licenses were probably died to the disk serial number.

There were two HDs, both IDE. The boot disk is about 6GB, and the spare data disk is 12GB, but nearly empty.

I have a small bias in favor of VirtualPC just because its free and I've used it successfully in the past. But this is a good excuse to revisit the state of the art.

I do know from direct experience that it is possible to install and boot DOS 5.0 and Win95 in VirtualPC, but the VM extensions weren't available so the experience isn't as seamless as I would have liked. A very old DirectX game that failed miserably under XP SP2 runs really nicely on that VM, and actually plays better in a lot of ways than it did on period hardware, so that gives me hope that this is possible.

Edit 2:

Well, I'm closer than I was when I asked... so thanks to all for helpful suggestions and hints to what I should be trying.

I used WinImage to copy the disks, and VirtualPC 2007 to attempt to boot. So far, I have it booting in safe mode, but hanging with a black screen otherwise. I strongly suspect that the copy of Artisoft Lantastic 8.0 (anyone else remember them?) that is still installed for networking with even older PCs that mostly don't exist any more is the culprit there.

In my infinite free time, I will try to resolve the differences between a Safe Mode boot and a normal boot, and feel that it is likely to yield to pressure.

I'd accept more than one answer if I could... this isn't as black and white a question as the one accepted answer convention assumes.

WinImage can open Virtual PC and VMWare images, convert between physical and virtual, and even convert between VMWare and VHD. This is a incredible tool, has a 64 bit version and and is free.

WinImage Site

Well, it's really, really easy to convert physical disks to VHDs with Hyper-V: http://blogs.msdn.com/virtual_pc_guy/archive/2008/04/08/copying-a-physical-disk-to-a-virtual-hard-disk-with-hyper-v.aspx

If I were going to do this with VMware, I'd create a new VM with the same number, size, and type (IDE or SCSI) disks as the host computer. I'd also add SCSI disks that connect to the physical hard disk drives (already mounted up in the host computer). I'd boot a disk imaging program on the VM (Ghost, Clonezilla, etc) and clone the SCSI disks representing the physical disks over to the virtual disks.

That looks possible with VirtualPC to a point, but the release notes for VirtualPC 2007 (http://download.microsoft.com/download/4/4/c/44ccd131-67fb-4224-a96e-193be1765b43/relnotes.htm) say that attaching physical disks to VMs is no longer possible. (Seems like a silly thing to remove...)

Now, after you convert those disks, will they boot? Who knows. If the original system was using IDE disks, I'd say you've got an 80/20 shot that it'll boot. You'll see a lot of driver detect messages, and you'll have to use a virtual machine manager that has driver support for WinME for its virtual devices. That may be a challenge.

Hope that gives you some ideas.

I recently played with VMWare VCenter Converter Standalone (free download from vmware site). I noticed this had an option to convert a physical machine into a virtual machine, and whilst I didn't try this option myself, this might be worthy of further investigation for your needs. There seems to be a few tools out there to convert between the various VHD formats so you might be able to get it back into Virtual PC. YMMV.

You should use the free Disk2VHD tool which will create a VHD from a disk, even if currently running. It also neatens up the device listings so the VHD will boot correctly under VirtualPC/Hyper-V/Windows Virtual

This tool was written by Mark Russinovich and the gang at SysInternals. It runs perfectly even while INSIDE the machine being imaged.

One issue you'll definitely run into is hardware recognition. Windows historically 'freaks out' when you take a drive from one machine, install it in another that has different hardware components, and attempt to boot (which is essentially what you'd be doing).

Basically, if Windows determines upon boot up that too much has changed in the system from the current configuration in the registry, it will just stop the boot process and give you an error message.

But if you get around that, it should be possible.