I finally got around to installing Virtual PC 5.2. Microsoft bought the company that sold it (Connectix) and has just annouced that Microsoft Virtual PC 2004 has RTM'ed. It was a bit of a struggle but I finally installed a copy of Windows XP into an instance of a virtual PC (called a guest PC). The trick was to just get a real bootable CD of Windows XP and give up on my MSDN disks and iso images.
Anyway, it works great and with the extra integration features installed, the mouse now works seamlessly between the host PC and the guest PC. I plan to use it for installing and evaluating dubious software I get off the Internet with no fear of screwing up my development partition. The performance isn't great but it's useable.