The error is:
2014-04-29T12:59:19.328-04:00 [00588 error 'task-2'] BlockLevelVolumeCloneMgr::ReadAndSkipBadBlocks(): Error (type: 2, code: 2) reading 655360 bytes starting at 0x0000001b34109c00 from the source volume C:
2014-04-29T12:59:19.328-04:00 [00588 error 'task-2'] BlockLevelVolumeCloneMgr::ReadAndSkipBadBlocks(): Unrecoverable error (type: 2, code: 2) reading 655360 bytes starting from 0x0000001b34109c00 from the source volume C:
you should run command "chkdsk c: /b" and then try the conversion again.
HTH