I seek to create a virtual hard drive which will be readable and writable (by the host OS, not by a VirtualMachine) as an ordinary hard drive while being stored as a single file (or a pair, maybe) on a host partition. I'd also like it to be resizable. Actual image file format doesn't really matter (but would be nice if it could be something common). I use Windows XP. Any ideas?
UPDATE: Even though I've accepted an answer, I am still looking for more solutions. One another I've found and used successfully was WinMount which can mount a usual ZIP archive as a hard drive.