Can Windows 7 restore itself from image to a smaller HDD than original?

"Before I try to mess up with an XML file that describes the disks' and partitions' sizes of the backed up machine, I'm giving Acronis True Image a go.

Thus far, I've downloaded the trial version, installed it to get access to the ""Bootable Media Rescue Builder"", created Acronis recovery CD, loaded it on the notebook which I'm trying to restore on and so far, it allowed me to pick just the .vhd file of the backup (Windows Restore, on the contrary, requires the path to a folder where the backup resides and will take many more files into consideration than just the .vhd file) and it seems to be doing the restore into partitions that I've newly created.

It's looking promising, I'll report back how it will have gone."