How to create a VM from a XP-mode VHD

Download the VHD from here:
Download Windows XP Mode from Official Microsoft Download Center

Once you downloaded the file WindowsXPMode_en-us.exe run it. It will extract a file named Windows XP Mode base.vhd.
Copy that to xpmode.vhd and create a textfile named xpmode.vmdk with this content:

# Disk DescriptorFile

version=1

encoding="windows-1252"

CID=d541ba78

parentCID=ffffffff

isNativeSnapshot="no"

createType="custom"

# Extent description

RW 268435456 VPCSPARSE "xpmode.vhd"

# The Disk Data Base

#DDB

ddb.adapterType = "ide"

ddb.geometry.cylinders = "16383"

ddb.geometry.heads = "16"

ddb.geometry.sectors = "63"

Now create a XP VM and add xpmode.vmdk as existing disk. After first boot install the vmware-tools and apply the license that was part of the download.

Done - no need to use Converter