To save you reading a whole lot of me ranting the short answer is that if you want to restore a bkf file to a Microsoft Virtual PC the file cannot be bigger than 4gb if you are accessing it via a share (you will get an error that the file is inconsistent)
If the file is bigger than 4 gb you need to access via the network e.g. a UNC path or a mapped drive. Note that you can map a drive to a share on the Host PC. My 37gb restore took less than 3 hours using this method and worked pretty much first time although I had to re-activate XP with Microsoft.
Also note that despite what is says on the tin Acronis cannot convert an image to a bootable virtual pc (vhd file) and that bloody microsoft have made xp bkf files incompatable with Vista and Windows 7. There's a workaround for Vista which may work for Windows 7 as well.
The sysinternals Disk2vhd v1.3 tool that in theory can create a bootable vhd file from a running system on the fly can't currently cope with any bad sectors at all (they say a future version will) and the Acronis Sector copy method had the same problem. This after I'd spent 5 hours running checkdisk which didn't find any bad sectors...
Update - version 1.4 of Disk2Vhd (1st Dec 2009) claims to be able to now skip bad sectors but I haven't tried it yet.
To sum up, if you wan't to create a Virtual PC of your current XP machine, run a Windows Backup, then restore it in the XP VM using a network connection. I told the Restore to replace existing files if the backup contained newer versions which seemed to work. Make sure you install the VM Additions (my mouse wouldn't work until I did)
If you're upgrading XP to Windows 7, you'll have to do a clean install. The XP bkf files are not compatable with Vista / Windows 7 so make sure you copied all your data somewhere else first...