If you are running your Windows Server 2008 over Hyper-V, we must first make the extra space available through the Hyper-V Manager

Making space available

1. Open Hyper-V Manager on physical machine

2. Stop the target VM

3. Right-click target VM and select settings

4. Hardware > IDE Controller 0 > Hard drive

5. Edit Virtual Hard Disk

6. Choose Action > Expand

7. Enter expansion size

This is not the end of it. The disk drive on your VM internally is still only configured for the older space availability

Using the Available space

1. Log into target VM

2. Open Server Manager

3. Storage > Disk Management

4.right-click Disk > Extend Volume

5. Enter expansion size from available size

Reference:
http://blogs.msdn.com/b/agujjar/archive/2008/04/28/expanding-disk-space-in-hyper-v-and-windows-server-2008.aspx

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