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For the most part, the steps you took make sense. I think the issue is with understanding the purpose of the default path in Virtual Server. This path specifies the location in which new virtual machines will be created. The .vmc file and associated VHDs will be created here, unless you manually specify a different path. The search paths allow you to specify where the Virtual Server Admin Web site will look for virtual machines and associated files.
In your case, after you manually move a VM, you need to "add" it to Virtual Server. To this, use the Add command in the Virtual Machines. If the new path is in the search paths list, it should automatically be available in the list. Otherwise, you will need to type the full path name and location to the .vmc file. Note that if the physical path for the VHDs has changed, you might need to re-attach them to the VM. Overall, it's usually easy to move, copy, and add VMs (as long as you understand the purpose of the path options).
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