Cliff Hobbs at myITforum.com

I recently was setting up a Home Server on top of Hyper-V (Note: this is not a supported configuration, so if you wish to do the same - be it on your head) and had to decide between using physical disks directly attached to the virtual machine, or using fixed size virtual hard disks.  I had 5 SATA disks that I wanted to connect to the Home Server - and in the end I decided to use fixed size virtual hard disks where each physical disk had a single fixed size virtual hard disk that took up all the space available.

There were a number of things that I considered before coming to this decision:

1. Performance: There is a big performance difference between dynamically expanding virtual hard disks and fixed size virtual hard disks.  But there really is not much difference between fixed size virtual hard disks and physical disks, so this did not really influence my decision here.
2. Mobility: This is an interesting one, as it can go either way depending on your hardware.  In my case - using direct attached SATA storage - fixed size virtual hard disks are easier to move around.  If - however - you are using network based storage or SAN infrastructure, then physical disks are easier to move around.
3. Backup: This was a big one for me.  If you use physical disks you cannot use VSS to backup your virtual machine - but you can if you are using fixed size virtual hard disks (similarly - you cannot use virtual machine snapshots with physical disks - but using virtual machine snapshots with fixed size virtual hard disks is not a good idea either).
4. Data Safety: I spent a while pondering this one.  The question is which option is least likely to be significantly affected by random data corruption.  As I discussed a little while ago the fixed size virtual hard disk format is mostly just data - and corruption there would have the same effect as for a physical hard disk.  When using a fixed size virtual hard disk you would have to have corruption in the 511 byte footer, or in the parents NTFS file system structure, to cause a problem.  So while there is definitely a greater potential for "catastrophic" data loss - the difference is fairly small.
5. Hardware monitoring: This was another big one for me.  By using fixed size virtual hard disks I can run hardware monitoring tools (like SMART monitoring tools) in the parent partition.  If you use physical disks with a virtual machine you cannot use these sorts of tools in the parent partition or in the virtual machine.

Hope this helps you when you are faced with similar decisions.

Cheers,
Ben