cyborg7 wrote: I found .PQI backup of it also, can you please guide how to make a virtual machine using .PQI file?
Any Backup Image File(s) can be restored to a HDD, physical or virtual, with the appropriate software. That of which either created it or is capable of working with the target image type. A .PQI file is a Disk/Drive Image created by PowerQuest Disk Imaging Software. PowerQuest was purchased 10 years ago by Symantec and IIRC Norton Ghost could at one time open .PQI Images, however I do not know whether or not it's still true today with the latest Symantec Products.
And apart this case, is there any way to make a VM using .ISO backup file?
As I already said, "Using an ISO Image that is just a copy of the Windows XP Filesystem is not the best source from which to create a Virtual Machine!" an this is because it is nothing more then a copy of the Filesystem and while you certainly can extract its contents to a disk, physical or virtual, nonetheless the disk will not be bootable and would have to be repaired.
Since you still have the HDD then I'd suggest you do as I have already mentioned as VMware vCenter Converter is free and I'm assuming you already have VMware Workstation. So between the two, you can create a Virtual Machine from the Physical HDD.