win7 virtual pc - attach existing vhd - error "Cannot attach the virtual hard disk to the virtual machine. Check the values provided and try again"

I created a VHD using Norton Ghost, from a 136 GB disk.

I attempted to use the VHD in Windows Virtual PC, but got the error:
"Cannot attach the virtual hard disk to the virtual machine. Check the values provided and try again"

I then used Paragon Partition manager to shrink the partition down to 85GB, having read that this could be caused because there is a size limit of 127GB on a volume.  (note that the virtual disk is still 136GB - I cant figfure out how to  remove the unallocated 50+ gb at the end).

Anyway, I try to use the drive in virtual PC again and get the same issue.

I wish it gave some more clues as to what is wrong.

I dont have any anti virus as yet, so its not the kasperski issue that some have had!

I need the VHD as it was the Vista system that existed before my new Windows 7 install splatted over it!

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this is only my day job!!