BIOS firmware or UEFI firmware boot only Windows boot manager (directly or via boot records MBR+PBR). Firmware does not boot the OS (kernel/drivers) !
It is Windows boot manager which starts Windows OS loader which loads kernel and drivers and gives control to kernel after loading all modules.
A VHD is a disk for Windows boot manager.
So Windows boot manager can load a Windows OS image from VHD.
To make a VHD natively bootable do this (for BIOS booting):
A) start with blank disk, initialize disk, create single partition and format it with NTFS
B) make partition active
C) place VHD on partition
D) create boot files on disk/partition
UEFI booting is different as it needs a separate EFI System Partition for boot files (+ MS Reserved Partition for Windows)