The solution as follows:
1) Boot from your Setup CD. When the text-based part of Setup begins, follow the prompts; choose the repair or recover option by pressing R.
2) When prompted, type the Administrator password. (if you didn't create one try pressing enter).
3) You should expand the file from the CD. The command would be
expand d:\i386\hal.dl_ c:\windows\system32\hal.dll.
Substitute d: for the drive letter of your CD. Once you have expanded the file type "exit" to exit the Recovery Console and restart VM.