I booted from a VHD on my laptop and hoped to sysprep this image, but it didn't let me do it. I got a fatal error during the process. I used the following command: sysprep /generalize /shutdown. My question is it possible at all to sysprep a VHD without any HyperV or virtual PC technology?
Windows 7 actually supports booting from VHD without Hyper-V or Virtual PC: MSDN Windows 7 VHD Boot Setup
I have been dealing with possibly a similar issue with sysprep under several environments with Real PC's and Virtuals on VMware ESX / vSphere. What I have found is that a single image can go through sysprep 3 times before Windows goes into an "armed" state due to activation protection.
Microsoft has an article discussing the issue and I have used the solution of adding a "disarm" portion to the unattend.xml file and I no longer receive the error message.