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