I've never used the virtual PC myself, but I would think that the virtual hard drive is a special file on the drive.  Otherwise you would either be creating a new partition on the hard drive, or at the least a logical drive in an extended partition.  Did you take a good look at what's on your drive with Windows Explorer?  I bet you find a strange 20 GB file on your drive somewhere.

 

So you got 20GB missing in your properties of the drive?

 

did you empty the recycling bin and reboot? 

the reboot, i just tried and no luck. yes i searched through my entire drive, and still 20gb is somehow misteriously being used up. I used WinDirStat. and that cant find whats using an extra 20gb on my drive. strange aint it. on microsoft's drive. they said when you delete the .vhd file, (which i did) you'll get back your space, but i didnt.

I looked through the entire drive again, i found nothing. no file that takes up 20gb. :-(

Try uninstalling Virtual PC 2007. Or you could launch it and see if it still has the configuration set for a 20gb drive, if so you can delete it from there.