A colleague told me he recently tried using the Disk Management snap-in to convert a basic disk to dynamic on a computer running Windows Server 2003 SP2. When he attempted the conversion however, nothing happened--no conversion, and no error message. He also tried the Convert Dynamic command of Diskpart, but that didn't work either.
A little digging around dug up this KB article which outlined the problem--the single volume on the disk completely filled the disk. That is, there was no available space on the disk to create the LDM database used by dynamic disks, which needs at least 1 MB.
Rather than backing up, deleting , and later having to recreate one of the volumes on the disk, my colleague tried the following instead. He booted his server using a Vista DVD, and when the Install Windows dialog appeared he clicked Install Now. Then he pressed SHIFT + F10 to break into a Windows PE command prompt. He then typed DISKPART and used the SHRINK subcommand to shrink the volume by a few megabytes. Then he aborted Setup, removed the Vista DVD, and rebooted his server, after which he was able to convert the disk from basic to dynamic.
The lessons here? First, converting a disk from basic to dynamic requires unallocated space on your disk, so when you partition a drive, leave a little unallocated space on your drive. And second, you can use a Vista DVD (or a Windows Server 2008 DVD or a Windows PE 2.x CD) and use DISKPART SHRINK to shrink disk volumes on earlier versions of Windows such as Windows Server 2003, Windows 2000 Server, or even Windows XP.