There are several methods to convert virtual disks. The method that fits best depends on what you currently have, and what you want to end up with after the conversion. For Windows 2003 the recommended virtual disk controller is "lsilogic" (not "ide"), so that's what I would recommend you select for the target.
Unless you want to use command line tools to convert the virtual disk, I'd suggest you either use the Converter and select the "ide" controller in the wizard to convert the VM as it is, or - that's what I would do - temporarily add another virtual SCSI disk with an lsilogic controller to the current VM (this will force Windows to load the required drivers), and then - after removing the temporary disk again - convert the VM to the proper disk format and controller type "lsilogic".
André