When you run MS Virtual PC on a drive formatted for FAT32 you might get some unanticipated behavior.  The maximum file size on FAT32 is 4GB - 1 byte.  If your .VHD file needs to grow beyond this limit, VPC will start creating files that have the same name as your .VHD but an extension of .V0n where n starts at 1 and gets incremented every time a new 4GB extension is needed.  VPC automatically starts splitting the HD image across logical files to fit within the FAT32 limitation.  If you want to back up a FAT32-based VHD you must also back up all of the .V0n files.  If you try to start the VPC without the .V0n files, your virtual image will not boot because the guest OS thinks the file system is corrupted.  This also applies to differencing disks.

This might come up because many external USB drives come from the factory formatted as FAT32.  If you want to avoid this altogether, run the VHDs on a NTFS-formatted drive.