So, for some reason you want to convert a machine to a vhd. Let me not limit your thinking by saying that this has to be a physcial machine, it could be a VM.
I am going to cover two items: XenConvert (free, converts running machine), and a Hyper-V feature (part of Hyper-V, converts any mountable disk).
With Hyper-V you can take a physical disk, attache it to a Hyper-V host and convert the disk (fully intact) to a VHD. A neat feature that no-one talks about.
This is great for a number of scenarios where you have a physical drive, a host, and the machine on the physical drive can be is is offline (we will assume that this is a disaster recovery exercise).
But those are the limitations. Still, a neat feature.
Mount the disk to a Hyper-V host. (SCSI, in an external enclosure, ATA, however)
Be sure that the disk is attached and recognized in Disk manager
Open Hyper-V manager
Select Actions -> New -> Hard Disk..
Step through the wizard to select your type of virtual disk, the location, then stop.
On the Configure Disk page, select the option "Copy the contents of the specific physical disk"
Then complete the wizard.
This then copies the contents of the desired physical disk (not just the files, but the actual blocks, formatting and all) to a VHD.
That is it.
Another option is to
Download the XenConvert tool (You can download it from MyCitrix (@ Citrix.com) where you download XenServer)
Install it within the Operating System that you want to convert (again, physical or VM).
Then begin the conversion process choosing VHD as your output.
You can just convert an existing installation to VHD (it can even route the VHD to a network share using a mapped drive).
the benefit of XenConvert: You machine is running the entire time.
I have converted SQL, Operations Manager, and SCVMM servers to VHDs (yes, they boot and everything) then moved them to either Hyper-V or XenServer.
I hope you get creative with your options.
You can convert physical to virtual, virtual to virtual, etc. No need for expensive conversion tools as long as you have the time and the knowledge.