Has anyone used VHD or VHDX virtual drives to store media.

Reading about these drives makes me think they should be recognised by Avid.

If anyone has any info in relation to linked files or the Avid Mediafiles folder, I'd be interested to hear about their experiences.

if it mounts as an actual local disk (which a VHD(x) will, then it should work in media composer. But the question i have is...why? 

Simple really.

In common with editors who like to keep their individual project media in separate Avid Mediafiles/MXF/folders (1, 2,3 etc), it's always been a limitation that MC will only write new files (imported/rendered/transcoded media) in the number 1 folder.

This means you have to keep renumbering folders as you change projects. The traditional workaround was to use the old DOS command 'Subst' to substitute a drive letter for a path in order to treat a virtual drive (a reserved area rather than an actual disk drive) as a physical drive. This way, any folder could be seen as a drive letter.

You would thus use the Subst command to assign folders as a bunch of new drive letters - each of them with a Mediafiles/MXF/1 folder structure. Then it's simply a matter of assigning a default media drive per project.

Whilst this worked, using DOS commands was a bit fiddly and these drive substitutions would disappear once you restarted Windows, unless you created DOS batch files to execute at startup and restore these drives.

Having recently read-up on VHD drives, I thought this would be a more modern solution to creating virtual drives, rather than  fiddling with DOS commands and batch files.

No need to use DOS when there are several free apps that will automatically re-mount on boot your virtual drives for you.  I used to use this 10 years ago when the MediaFiles folder would reach capacity of 5000 items on my external USB drive.  I think this was the one linked below I used back then.

https://download.cnet.com/visual-subst/3000-2248_4-10598834.html