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This problem is in relation to scanning the boot.ini file and converting with the proper drivers. After erroring, it will bluescreen uppon bootup with a 0x00000007B error and VMWare converter will give an error similar to the above.
Remove any switches from the boot.ini that have the /3G in them. Reboot. Retry. Succeed.
Annoying error, don't follow any of the suggestions for booting into windows 7 recovery and tryign to edit registry. It's a simple edit of the disk boot options to resolve.