Acronis True Image EE Server taking over network PXE booting

Your VM has the wrong Boot Device drivers (and possibly HAL), on Win5.1 this will come up as a STOP 7B.

Injecting the correct drivers is a bit of a hassle after the fact. MS has an article on fixing this in XP (it's basically the exact same thing in 2K).

It boils down to:

• Mount the VHD on a Win7 or similar machine.
• Load the registry hives, merge the driver information, unload.
• Inject the driver files (there's only a few, like 5 files).
• Unmount the VHD

Note - Doing a P2V on a Win2K server is going to be pretty rough. That's an 11 year old OS. You're way past time to ditch it and upgrade to something newer.

OK, first let's clear up a few misconceptions:

As MailQ has pointed out, most diskless server configurations require NFS (since you mentioned ubuntu in the comments, check out their instructions). It doesn't HAVE to be NFS (the Network File System from Sun), but it does have to be A Network File System -- you can't PXE load a whole OS image over the network¹, and TFTP is there just to hand you a kernel that can boot.
Your kernel then looks to the network for the resources it needs (like a root filesystem, typically mounted over NFS) -- In the immortal slogan of Sun, pioneer of the diskless workstation, The Network is The Computer, or in the modern parlance Your data is in the cloud - in this case your local ethernet cloud...

A LiveCD by contrast is a completely different animal - you are booting off the CD, not over the network, and you have the CD's Filesystem to contain your OS (usually in a magic "squashFS" format these days). That's 600MB to 4GB of space - substantially more than you'd want to be shoving around over ethernet.

Now as you pointed out, there are NFS servers available for Windows (Services for Unix / Subsystem for Unix Applications has one, and it's quite adequate and easy to configure. Technet has further details). If you want to set this up in a production environment you would need a Server installation of Windows, with SFU/SUA installed and properly configured.

Assuming the requirements above have not discouraged you, The Fedora folks have a guide on how to set up diskless Fedora systems. Translating the UNIXisms to their equivalent configuration details on your Windows TFTP and NFS servers is left as an exercise for the reader.

¹ - Technically you probably can PXE load the whole OS disk image, but you certainly shouldn't: The volume of traffic would be sheer insanity, you wouldn't be able to save data anywhere permanently, and I've never seen such a beast in the wild.