Use Virtual Hard Disk Files
 

This is a very cool aspect of Windows 7 you can create and manage virtual hard disks files in Windows 7 as if they were real disks. This can allow you to use a live Windows installation on the virtual disk without the need to boot the virtual Computer.

To create a virtual disk you have to press the Windows Key, right-click on Computer, then go to Manage > Disk Management > Action > Create VHD, there you can specify the location and size of your virtual hard disk file.

To attach the virtual disk file, press the Windows Key, right-click Computer, then go to Manage > Disk Management > Action > Attach VHD and you have to specify the location and if it’s read only or not.

To initialise a virtual hard disk, press the Windows Key, right-click on Computer, go to Manage > Disk Management > Action > Attach VHD, specify the location, click OK, then right click on the virtual disk and click on Initialise Disk. Select the partition style you want to use and then right-click on the unallocated space and click "New Simple Volume" and follow the instructions wizard. Now, a new Hard Drive appears in Windows Explorer and you can use it as a real partition.

Interesting...

Does the drive stay active when you shutdown the PC and reboot or do you loose all the data saved to it ?

Also can it be formatted to say FAT32 and then made bootable to DOS ?
This could be handy as I use DOS software at work and have to set it up via USB stick or FDD as none of it will run on XP or later.

I'm not sure about formating in FAT 32 (try it) but