Can I use VHD file to boot VMWare?
From what I know, you have to convert it to a VMDK format image. You can use a tool like VBoxHDTools to convert between image formats.
The latest version of VMWare player seems to play .vhd files out of the box.
Create the VM using "I will install the operating system later." and then when the VM has been created edit its settings to remove the existing empty virtual hard disk (.vmdk) and then add the one you created from the .vhd