Yes this should even work with the VM powered on. After expanding the virtual disk in the GUI, connect to the Windows 2003 VM (either open the console or via an administrative RDP session) and rescan the storage in the Disk Management. Assuming the data disk has either only a single partition or is the last partition on the disk and does not have the pagefile/swapfile on it, you may even be able to extend the disk space using the diskpart command line utility.
André