First, I'd expect some problems with the device drivers when you try to restore a vmware image onto a xen virtual environment - unless they present similar virtual hardware.
Actually, your lucky on this one. Windows *always* loads an ide driver into the Critical Device Database unless you explicitly tell it not to with an installation answer file, or remove it after install.
However, for the actual copy operation, I'd recommend clonezilla-live (http://www.clonezilla.org/clonezilla-live/). Boot its iso image into a menu system that will let you mount the image storage space via nfs, samba, or ssh-fs, then tell it to save the whole disk. The advantage over dd is that it knows enough about ntfs and most linux file systems to just save the used blocks and when you restore it will let you pick from the list of images you've saved.
Yup, did the same thing recently with WinPE 2.0 and Ghost (Same internal concepts, faster then dd and ssh/cp) when moving off an ESX server into Xen 3.2.
jlc