Windows 7 Virtual PC: "Cannot Attach The Virtual Hard Disk ..." Error?

Got a new Windows 7 Enterprise 64 bit machine, found that it did not come with virtual PC. Downloaded the critical patch Windows6.1-KB958559-x64-RefreshPkg.msu and installed it. Windows Virtual PC shows up in my Start Menu. Good so far. I go through the steps to create a virtual machine and use the option to 'use an existing vhd file' and when I click 'Create' I get the above pop-up message "Cannot attach the virtual hard disk to the virtual machine. Check values and try again". A factual message but completely useless as with all error messages from Microsoft. I have tried the following:1. When I attach that vhd using Disk Management, it mounts in drive E:, I can see the files and browse the dirs in E:. In the Disk Management View, the drive shows up as 127 Gigs but 107 is unallocated space. The physical size of the vhd is only 25 Gigs2. Others in my company were able to create the virtual machine with the same vhd, checked the byte size and timing, so nothing is wrong with the vhd file itself.

3. Tried to create after shutting down all virus protection including the Micorsoft antimalware protection service. No luck4. Tried Vhd resize to resize the vhd to a smaller size (since it showed up in disk management as 127 Gigs, I thought maybe it was that size), but VHDResizer could not open the input file, gave an errors "Can only load fixed or dynamic drives"