Thanks. No need to apologise. I'm not an expert or an IT person so I'm probably not much help now - just thought I'd try and help having done a few installs. I only know about installs on a hard drive within a computer so am lacking understanding about how things work with vhd. It does sound quite complex. What makes me think though, is that when you did the refresh of Windows 10 in May it may have done a reset without keeping your personal files - there are two reset options - one with keeping your files and one without.

Regardless of what happened there it seems Windows 10 reinstalled without your files. Due to my limited knowledge, my take on this would be to try and go back to basics and forget external drives and vhd, wipe your internal drive by filling it with zeros, format the drive with a Windows 7 disk, reinstall Windows 7 from a Windows 7 ISO and then try and install the Windows 7 system image from within Windows 7. I had to do this on a laptop that had a Cedartrail processor and crashed consistently with Windows 10. I also couldn't get my Windows 7 image to reinstall or accept the recovery disk. I ended up doing what I suggested above.

1) Wipe the internal disk
2) Reinstall Windows 7 - either from a Windows 7 disk, or from recovery disks, or from a burned Windows 7 ISO.
3) Restore your Windows 7 image within Windows 7 or -
4) After re-installing Windows 7, then try using the recovery disk to restore the image.

For some reason I found I couldn't actually restore the image until I had done all the Windows 7 updates first. So this is a slow solution, but it should get you back to a clean Windows 7 install, and then be able to recover all your files by re-imaging after you have an up to date clean install of Windows 7.

Someone more experienced may be able to suggest a quicker route. It actually took me 10 days to get Windows 7 back on that machine! But then I tried various different things, so it might be quicker for you if you have a Windows 7 Disk with Service Pack 1. My manufacturer recovery disks didn't have Service Pack one. The quickest option might be to download the Windows 7 ISO from Microsoft and use your Windows 7 product key with it - it's more likely to be up to date and need less updates.