Okay. FINALLY successful.
I ended up using ms-sys on sysreccd to write an XP MBR to disk(0). Surprisingly, that does not automatically revert the system to boot in "plain-old" XP boot.ini mode. After multiple surgery-with-meatcleaver mods, ended up moving C:\bootmgr on the XP disk to bootmgr.bak, and (not sure if this was necessary) C:\Boot to Boot.bak.
After doing this, the system booted into XP directly on power-on (with the original boot.ini.)
The configuration for Converter that (finally after several iterations) worked, used the original boot.ini (with the partition(2) entry). Unfortunately for those reading along with bated breath, I cannot remember whether I selected the dell partition in the conversion or not. However, Disk Management in the VM shows no evidence of that partition, just the C: partition.