Windows Embedded Standard 7supports booting from a VHD file. Installing the OS into a VHD can be very easy.

• Boot IBW (Image Building Wizard)
• Before starting the setup process press Shift+F10
• Run diskpart
• Type in the following commands
  in this sample the file is located on drive C:
  with the filename win7emb.vhd
  and a size of 5GB

create vdisk file=C:\win7emb.vhd maximum=5210 type=fixed
select vdisk file=C:\win7emb.vhd
attach vdisk
exit

• Start the setup and create the configuration you need
• IMPORTANT: VHD Boot needs the following component

System Services
- File System
- - Advanced File System

• Finish the setup

IBW will now install the OS into the VHD file and setup the correct boot settings.

If you receive a BSOD with error code 0X00000012F then check if you have included the Advanced File System component!

The video below will show you the installation process on a VHD.