99 steps - 98 uneccessary = www.winimage.com
You don't need that much work, a simply conversion is all it takes.
as far as distributing the images, MS may not have a problem but it depends on the EULA agreement, I am pretty sure it's very specific, and it says something about NOT re-distributing without their permission.
did you call MS?
Well, I'm guessing a .vmc does not even contain any Microsoft operating system code - that's why I'm thinking it may be legal.
I'm not an expert but I thought the .VHD contained all the operating system bits.
Thanks for your reply,