I have the hard disks from a PC that was happily running Windows Me until is it suffered an unknown hardware failure. The drives are intact, and can be mounted and read on other PCs.

We have data backups, but there is licensed software installed that may not be possible to migrate to newer versions running on a more modern platform making the idea of just booting a virtual image attractive.

Is it possible to make VHDs from the drives such that I can boot them in VirtualPC?

If not VirtualPC, would it be possible in any other virtualization tool?

Edit: Some more details....

The system was running Windows Me, but upgraded from Windows 95 (or possibly 98). It can't have been more than a Pentium II, but I will have to look at the motherboard to confirm that. There were no "exotic" devices installed, and nothing beyond the usual legacy stuff that would need to survive into a virtual machine.

The licensed software did not have a dongle, so I won't need to worry about virtualizing a physical dongle of some kind. Licenses were probably died to the disk serial number.

There were two HDs, both IDE. The boot disk is about 6GB, and the spare data disk is 12GB, but nearly empty.

I have a small bias in favor of VirtualPC just because its free and I've used it successfully in the past. But this is a good excuse to revisit the state of the art.

I do know from direct experience that it is possible to install and boot DOS 5.0 and Win95 in VirtualPC, but the VM extensions weren't available so the experience isn't as seamless as I would have liked. A very old DirectX game that failed miserably under XP SP2 runs really nicely on that VM, and actually plays better in a lot of ways than it did on period hardware, so that gives me hope that this is possible.

Edit 2:

Well, I'm closer than I was when I asked... so thanks to all for helpful suggestions and hints to what I should be trying.

I used WinImage to copy the disks, and VirtualPC 2007 to attempt to boot. So far, I have it booting in safe mode, but hanging with a black screen otherwise. I strongly suspect that the copy of Artisoft Lantastic 8.0 (anyone else remember them?) that is still installed for networking with even older PCs that mostly don't exist any more is the culprit there.

In my infinite free time, I will try to resolve the differences between a Safe Mode boot and a normal boot, and feel that it is likely to yield to pressure.

I'd accept more than one answer if I could... this isn't as black and white a question as the one accepted answer convention assumes.