How to create a file-encapsulated virtual hard drive on Windows XP?

Question

I seek to create a virtual hard drive which will be readable and writable (by the host OS, not by a VirtualMachine) as an ordinary hard drive while being stored as a single file (or a pair, maybe) on a host partition. I'd also like it to be resizable. Actual image file format doesn't really matter (but would be nice if it could be something common). I use Windows XP. Any ideas?

UPDATE: Even though I've accepted an answer, I am still looking for more solutions. One another I've found and used successfully was WinMount which can mount a usual ZIP archive as a hard drive.

Answer 1

If you happen have Microsoft Virtual Server installed, you can mount disk images in its Virtual Hard Disk (VHD) format from the command line, using this command:

vhdmount /p /f file.vhd

If you don't have it, it's available as a free download. You can perform a "custom" install and only install the vhdmount utility if you'd like.