Make new C: boot volume on VMWare ESXi guest

Bare metal Dell server from 2019 running ESXi and a single Windows Server 2019 with two logical volumes, C: (120GB), E: (1TB) on a RAID that has a ton of free space remaining. We're getting SMART errors about bad sector counts on the C: part which I'm thinking is SSD write burnout. It's causing periodic disk failure symptoms like long 30+s latency randomly rarely. A solution I'm considering is making a new boot/OS volume on the free space in the SSDDatastore, cloning from the current C or restoring from a Windows Server Backup on a USB connected external HDD. I haven't done this before so would like help doing so. I roughly think the process would be: Make the new volume in ESXi Restore the Windows Server Backup to that Set that as the bootable for that VM Troubleshoot any issues. Though, again, I haven't done this and don't know if this is fully realistic. Could use the help.