Could it be due to the fact that the VM can only support IDE drives and the laptop was running a SATA?
This, probably. The laptop likely didn't have an IDE driver loaded, and now it needs one to boot successfully. You could try drastic measures like replacing hal.dll in the restored image with a fresh one from a Windows installation disk (make sure you use one from the same version of Windows). This will allow Windows to rediscover hardware, and could allow it to load an IDE driver if one is present.
But in general, Windows Home Server is not designed to move a functional OS from one arbitrary set of hardware to a different set of hardware. It's designed to get a computer that's failed back up again in a reasonable amount of time.
I'm not on the WHS team, I just post a lot. :)