Free GizmoDrive is an excellent virtual CD, DVD, and HDD app
Apart from being able to mount .vhd files, GizmoDrive also supports .iso, .cue, .bin, .mds, .mdf, and .nrg formats. Using the create image feature you can create new image files from a disc or folder. If that's not enough, you can also use the app to burn disc images to physical media.
GizmoDrive isn't done there. Two more things its create image feature can do are set up a ram drive and create password-protected, encrypted virtual hard drives for storing sensitive data. Like most virtualization apps, you can either pre-allocate the virtual drive's full capacity or allow it to expand on-the-fly.
GizmoDrive is a free application for Windows, and adds several useful functions in a single, compact package. The developer packages several apps in one installer, so just make sure to uncheck what you don't want.