Robert Larson has a good post on an issue that is cropping up quite a bit for folks upgrading to Virtual Server 2005 R2 SP1 who don't read the fine print of the release note :) The gist of it is make sure you shut down (not save state, actually shut down) your VMs before running the upgrade. The Save State functionality is not compatible between versions so you have to shut the VMs before you upgrade or they will not be able to start and you'll have to discard the saved state which could result in data loss.

http://blogs.technet.com/roblarson/archive/2007/08/23/upgrading-to-virtual-server-2005-sp1-why-can-t-i-start-my-vms.aspx