New users of Virtual Server sometimes encounter very slow performance when installing an OS into a virtual machine using a SCSI .vhd disk.
If you want to use SCSI vhd’s, there is a virtual floppy that ships with Virtual Server. It can be found in the Virtual Machines Additions folder and is called "SCSI Shunt Driver.vfd" The virtual floppy includes SCSI drivers. When loading an OS you need to hit F6 in the beginning when it asks if you want to install additional SCSI drivers. Ensure the VM has the virtual floppy mounted and install the drivers from the floppy. After this is completed, the rest of the OS install should complete much faster. The reason for this is that operating system as shipped doesn’t have an optimized driver for the virtual hardware, the drivers on the floppy fix this. Once the OS install is completed, installing the VM Additions installs the appropriate drivers for the virtual hardware in Windows. The Virtual Server release notes have step by step instructions. Also, installing the OS from an ISO image is much faster than installing from a CD, especially if the ISO is on a different hard disk than where your VHD file is being written.