It worked also virtually in Virtualbox.
I guess the HP partitions have to do something with the error you get. (I also have HP laptop but I reduced my partition number a while ago => 4 primary partitions on a hdd are the limit)
Your H drive seems to be dynamical. But the rest of the partitions are primary but almost full.
This is what I did also in the test:
...hope the images are visible...
1. made a vhd on a 80gb drive, attached it...
2. chosed the vhd (25gb) and as expected there was a warning
3. the warning is this
4. clicked next to install
5. after install at the boot screen
6. in Win8 you see that Disk1 is my vhd drive
7. back on Win7 you see the (not yet attached) vhd on root of my c drive (80gb)
8. after attachment of vhd, it appears as drive e: (Disk 1) which has a primary partition
On my real configuration I have ONLY a 500gb disk with ONLY 3 primary partitions.
A 25gb vhd worked the first time I followed the tutorial. The vhd was created on root of c drive which is primary partition of Windows 7.
So I don't have a solution for your case at the moment.
Search for more info about the default partitions that HP made on the disk (I think the problem is here + you seem to run out of space on the primary partitions).
I hope you find a workaround on the problem
Cheers
Hopachi