DSL Embedded :: creating a virtual hard drive file
Those of us using frugal under qemu have been looking at ways to make a file that can be used as a virtual hard drive. Much to my surprise, I have come across a Windows XP utility that can do this!
fsutil file createnew <filename> <length>
fsutil file createnew C:\testfile.txt 1000
haven't tried it, but no reason it shouldn't work. You can then edit the bat file and make this a virtual drive and then after boot run mkfs.
You could also use qemu-img. More info in the qemu user guide
original here.