I will try to summarize all what has happened and where I'm at now currently:

Server is 2008 R2 (DC, exchange, IIS, SQL, etc) setup originally setup with software RAID 1.   At some point years ago the software RAID had failed and the second disk wasn't part of the mirror anymore and it was never fixed in disk management. Last week the server and wouldn't boot as the primary drive failed.  I selected secondary plex during startup just to see if that disk was still functioning, which to my suprise it did boot up but data was years old. 

At that point, I inserted Windows 2008 R2 DVD and started System Recovery from previous backup onto secondary plex drive.  Once complete, the server was backup and running.  Changed the system startup variable to secondary plex so it would boot that drive if restarted.

I am now trying to virtualize the server using disk2vhd in order to move it onto new hardware, however each time I try it fails with I/O error. I have re-tried multiple times stopping all major services to minimize I/O during disk2vhd, but still errors out about 3/4 way through.  I have run checkdisk and it repaired a few bad sectors on the secondary plex drive, yet still fails during disk2vhd.  I am currently running a defrag on the disk as it reported 36% defragmention and will try offline disk2vhd once complete using System Center VMM 2012 (not R2 as that's been removed - found that out the hard way!). 

I'm worried this disk has underlying errors which is why it failed years ago and Windows broke the mirror and why it won't work with online disk2vhd.

I have attached a picture of Disk Management which I find interesting as it shows Disk 0 as unknown (Not Initialized), Disk 1 having errors (can "Reactivate Disk" though unsure if that does anything destructive?), and then a missing disk at the bottom which I can also reactivate. I'm not sure if restoring the last working backup from disk 0 somehow messed up Disk 1 or confused it?  BIOS reports Disk 0 as 0MB so I'm thinking that drive is no good anymore. 

I guess what I'm looking for with this post is any answer or suggestion as to why disk2vhd might be failing, whether an offline disk2vhd maybe a better successful option, and what (if anything) I should do in Disk Management with these drives in their current state. I don't have a replacement 500GB drive for the mirror and I don't plan on getting one as I already have a new Hyper-V 2012 Core server setup to replace this failing server.  I just can't seem to get it to virtualize using online disk2vhd and wondering if it has something to do with the current drive setup/situation?

See this post and script to clean up the BCD (Boot Configuration Data store)

I ended up cleaning up the Disk Management and making the C: drive the System drive without having to use your script. 

Am I safe to now delete this 2GB OS partition since it is now listed as "System" and "Boot"?  It seems as though the WinPE image maybe copying to this small partition which is one of the possible problems.