Virtualization is really hot specifically after the release of Virtual Server 2005 R2.  Working with my collegues, they are seeing excellent performance gains running VS2005R2 on 64-bit host servers.  Many of my customers are asking about running WSSv2 and SPS2003 in such an environment.

Here are some facts I want to make you aware of:

909840 Windows SharePoint Services and SharePoint Portal Server 2003 do not support Virtual PC and Virtual Server for production environments

http://support.microsoft.com/default.aspx?scid=kb;EN-US;909840

897614 Windows Server System software not supported within a Microsoft Virtual Server environment

http://support.microsoft.com/default.aspx?scid=kb;EN-US;897614

This is really for a production environment.  I run WSSv2 and SPS2003 on Virtual PC 2004 and VS2005R2 in a lab environment for testing purposes.  Also, the product group is looking towards some future release of SharePoint that will be supported in a virtual environment.