In the past I have used dual booting on my system to handle server development versus client usage on a single machine.  Up until Windows 7 and Windows Server 2008 R2 that was one way of using both scenarios utilizing the bare metal of the machine.  Well, Windows 7 changed all that.  Since Windows 7 was in beta, I have been switching that mindset to use bootable VHD files instead.  I actually have a bootable VHD of Windows Server 2008 R2 with Hyper-V running Hyper-V images.  There are some great articles out there on the necessary steps to follow to do such a thing.

So below are the steps to follow to create the bootable VHD.

  1. Insert your Windows media (either Windows 7 or Windows Server 2008 R2) into the DVD drive and restart your computer.  You will need to make sure that you can boot from the DVD.  I will use Windows 7 for these instructions, but it is the same for Windows Server 2008 R2.
  2. When you are at the start of the Windows installation screen, press Shift+F10 keys.
  3. In the command window, type diskpart and press Enter.
  4. Now, you must decide if you want a Fixed size VHD or Expandable size VHD.
    • For Fixed, type this command in the command prompt:
      • create vdisk file=C:\VHD\Windows7.vhd maximum=40960
    • For expandable, type the following command in the command prompt:
      • create vdisk file=C:\VHD\Windows7.vhd maximum=40960 type=expandable
  5. Ok, now the file is created, you must select it for installation.  Type the following command:  select vdisk file=C:\VHD\Windows7.vhd
  6. Ok, now attach the vhd file as a disk.  Type the following command:  attach vdisk
  7. Type exit and press enter.
  8. Close the command prompt window.
  9. Click on the Install now button
  10. Check that you accept the license terms and click next.
  11. Choose the Custom (advanced) option during installation.
  12. Select the available, unallocated space drive (it should be the size you specified in the commands above).  Click Next
  13. Finish doing a clean install of Windows 7.
  14. When you are finished, you will have another option in the boot menu.  You may have to change the name of the boot item.

There are some good tutorials on this website: Windows SevenForums

NOTE:  If you have bitlocker enabled, you cannot use the bootable VHD option if the VHD resides on the same HDD that has bitlocker enabled.  You will need either a second HDD or a partition that is not encrypted by bitlocker.