defrogger,
Yes you can, no power off or reboot required. There are no drawbacks, but there are a couple of caveats. First, it must be Windows 2000 SP4 (you may need the DiskPart.exe from here) or newer and second, it cannot be the OS boot drive.
For example, if it's your drive D:\, then you can use the vClient to edit the Hard Disk 2 virtual disk with the new size. Login to Windows and open a cmd prompt.
C:\Windows\System32> diskpart
DISKPART> list volume
DISKPART> select volume X ( X is number of the volume with the new capacity )
DISKPART> extend
DISKPART> exit
Check Disk Management to verify the new capacity.
This KB article has a step-by-step video:
KB1007266
Jonathan
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