<p>I'd like to use alternatives to System Center Virtual Machine Manager 2008 is possible, in other words, any FREE tools?</p>

Google "Pysical to virtual conversion" or P2V.  There are several solutions available.  Unfortunately it sounds as though not many have had success with Microsoft's solution.
Try the following:
1. Download and install the VMWare Converter and follow the instructions to convert the physical machine.
2. Download the VMWare to VHD conversion utility from VMToolkit.com and convert the image.
This didn't work for me when I tried it last week, but I think it is because the drive I converted used PGP.