This could come in handy as many of our legacy virtual machines have small C drives, which over time can become an issue due to the size of modern software. Of course, take care and backup fully, as such a change may have issues. Done in two parts first use Gparted from http://gparted-livecd.tuxfamily.org/ to resize the VHD then use Gparted from http://gparted-livecd.tuxfamily.org/ to merge the old and new partions.
Check out the following link for details:
http://martyg.com.au/2008/01/05/resize-microsoft-virtual-hard-disks/
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