You really need to basically ignore the drive letters that you see in WinPE/BartPE. They're only temporary drive letter assignments for that CD boot session. To do a Bare Metal Recovery/Restore (BMR) to a VM guest machine, boot the ShadowProtect Recovery Environment CD within the VM guest machine and then use the Network Configuration tool's Disks tab to map a drive letter to a network share that contains the backup image file that you wish to restore to the VM guest's hard disk. Then use the Restore Wizard and select that backup image file (out on that mapped drive) and choose the VM guest's hard disk as the target and make sure you check the Hardware Independent Restore (HIR) checkbox on the Restore Wizard's options page. That's really all there is to it. Oh, also in the restore wizard I suggest you check the boxes to restore the backed up disk signature, restore the backed up MBR, and set the partition active.
One limitation of HIR in ShadowProtect Desktop/Server editioin is that it will only work on a volume on which ShadowProtect Desktop/Server Edition is actually installed. So, before you create the backup image which you intend to restore into the VM, make sure you have installed ShadowProtect, and THEN take a backup of the OS volume on which ShadowProtect is installed. You can then restore that backup to a different machine using HIR.