SQL Server, both 2005, and 2008, have both been supported in virtual environments, Microsoft or otherwise, for some time now. This means that, providing you followed the specific guidelines for SQL and virtualisation, you could happily virtualise SQL, as a standalone instance, on a virtual platform. This was acceptable for a number of smaller organisations - the fact that you could virtualise a SQL instance, and make it highly available on a virtualisation host cluster, gave them a greater level of resiliency than they had before! Win Win!
However, what about slightly larger, or more complex SQL deployments? In the physical world, no problems, clustering at the SQL level is supported – happy days. What about in virtual machines? Can I cluster SQL 2005, or 2008 at the Guest OS level, i.e. from a Windows VM, to a Windows VM, running on a virtual platform? Well, up until a few days back, you could do it, but you wouldn’t be supported. I’m now happy to say, you are supported when clustering SQL at the Guest OS level.
You can grab all the info you need, over at this SQL KB Article.