It is my practice to set up a system drive and a data drive(s) separately. I wanted to do the same thing within the XP VM.
There was a drive whose name is D: and was a CD-DVD drive. I changed D: to Q: and then I thought I create a data drive which I was planning to name as D:.
Now about your question: About "for adding the VHD to the VM" , I assume that's what I was trying to do but not sure.
Instead of IDE Controller 0, I high lighted SCSI Controller --> High lighted HARD Drive --> Add --> Dot mark on Virtual hard disk --> New and the rests are the same as my previous post.
If it is easier for you to post how to do it, then please do so, I will start from scratch.