On that note decided to try it myself-
in dosbox-x-
imgmake hdd.vhd -t hd -size 16
Loaded as is into MiSter
The DOS boot disk attempted a format, then-
"Setup cannot install MS-DOS 6.22 on your computer.
An error was detected while formatting your primary hard disk partition"
Now, THAT SAID, I then fdisked and deleted the parition. Rebooted the system and THEN it was able to format and install.
It then booted into DOS
So the VHD file is not inherently screwed, just something that DOSbox is doing to it.
BECAUSE I CAN'T LEAVE WELL ENOUGH ALONE
I tested tinstalling on DOSBox-X and had the same issue, managed to get it installing before DOSBox crashed, that's probably my stupid brain not understanding how to swap disks in DOSBox though. ¯\_(ツ)_/¯
Testing your boot disk it looks like it dunks the contents onto the VHD as is? Yeah I think you need to fdisk and format it via DOS first.