Unfortunately, after spending way too many hours trying to make this work, I just learned that you can not setup Windows 7 to boot from a VHD with Windows 7 professional, only Ultimate and Enterprise. This isn’t a show stopper, but it’s definitely a setback. I really wish I started with Ultimate to begin with. This was a big waste of time. I was getting: "License error: Booting from a vhd is not supported on this system"
For those pursuing this, here’s a good article:
http://www.markwilson.co.uk/blog/2009/10/native-boot-from-vhd-on-a-windows-xp-computer.htm
One thing that I had to change was, after “Attach VDISK”, I had to type:
SELECT PARTITION=1
I was getting an error saying no partition was selected. I also had to change from drive x to y, as it said x was already used.