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New VM from vmdk, Guest system really required?

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The Scenario: I used Terabyteunlimited tools (Copyp2v) to create a vmdk from a physical Win XP Pro machine.  Works like a charm.  Installed VMware Workstation 10, created a new VM and skipped the Guest OS, chose the vmdk and started the VM.  It booted to the desktop and started looking for drivers.  Across the bottom on a tooltip looking bar appeared "Install Windows XP Professional as you would on a physical computer. When you are done and the operating system boots up, click "I Finished Installing"."


I'm confused as the vmdk is a drive with Win XP Pro installed.  I do have a fresh unused copy of Win XP Pro but do I need to install it?  Will the VM work without it?  Is this a performance issue or a licensing issue?  Thanks for the help!


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