There is a great new tool available for download from Sysinternals site. Disk2vhd can convert live (it uses VSS) physical disk to a VHD file compatible with Virtual PC or Hyper-V virtualization.
Here is short info from the site itself:
To use VHDs produced by Disk2vhd, create a VM with the desired characteristics and add the VHDs to the VM’s configuration as IDE disks. On first boot, a VM booting a captured copy of Windows will detect the VM’s hardware and automatically install drivers, if present in the image. If the required drivers are not present, install them via the Virtual PC or Hyper-V integration components. You can also attach to VHDs using the Windows 7 or Windows Server 2008 R2 Disk Management or Diskpart utilities.
Disk2vhd runs on any Windows XP SP2 and newer operating system, and it also runs on 64bit versions.