Kvm

Install

apt-get install kvm vde2 kvm-source libvirt-bin

Create guest image

mkdir -p /var/kvm/guests/disks
qemu-img create -f qcow2 /var/kvm/guests/disks/win7pro.disk.img 10G 

Install guest

qemu-system-x86_64 -hda /var/kvm/guests/disks/win7pro.disk.img -cdrom /path/to/installation/image/SW_DVD5_Win_Pro_7_32BIT.ISO

Extend a disk-image

if i want to add additional 5 GB to my existing disk:

cd /path/to/imagedir/
qemu-img create -f raw add.img 5G

creates an emty image of 5 GB size
now cat the files...

cat originalDISK.img add.img >> newDISK.img
rm originalDISK.img
mv newDISK.img originalDISK.img

start the vm and use onboard tools to extend your partitions...
...have fun ;-)

BTW: better have a backup of your originalDISK.img rather than removing it for desaster-recovery! :-P