Here is a great tool for expanding a .VHD file without having to use a tool like Norton Ghost or WinImage. It's cheap at only 19.99 a license, definately worth the hassle that it will save you trying to find an alternative way.
For some free alternative methods to grow a .VHD see Conrad Agramont's Blog.
UPDATE #1
A problem that I am encountering with VHD Utility and something I should have realized last night is that it doesn't actually expand the partition on the VHD so being able to grow the maximum size of a dynamic disk is not very helpful when the partition on the disk doesn't expand as well. Here is another way that I found (easiest so far to expand and format partition, without using a partition management tool); devMode: Resize a Virtual Hard Drive.
UPDATE #2
So after using the VHD Utility to expand the VHD file I went ahead and purchased Partition Manager to actually extend the partition over the entire virtual drive. Worked great and was very fast. For me it was worth the 300 dollars for the server license.
