Some time ago we created a virtual machine with Windows XP that had a 4 GB C: drive (system) and 8 GB D: drive (data). With all those service packs and automatic updates a 4 GB drive for the Windows system is too small as we all know now.
I see three options to get around the problem:
Create a third virtual drive inside the VM (e.g. 10 GB) and extend the C: partition onto the second drive. To do this you must move the page file from C: to D: (you can’t have the pagefile on an extended disk).