I installed the Windows Virtual PC and XP Mode betas on my laptop running Windows 7 RC.  If you haven’t tried it yet, you can download the pieces (both of them) from http://www.microsoft.com/windows/virtual-pc/download.aspx.  The installation process is pretty simple (one MSU, a reboot, and an MSI).  Once you are done, you can start up the pre-build Windows XP virtual machine.  Once it is up and running, install any software you want, copy some shortcuts to the “All Users” start menu programs folder, and then close the virtual machine window.  This will hibernate the VM.

Notice then that the shortcuts copied to the “All Users” start menu now show up in a folder on your start menu (Programs –> Windows Virtual PC –> Virtual Windows XP Applications).  When you choose one of those shortcuts, the VM is automatically restarted and the application starts – seamlessly, without you even knowing it is running in a VM.

Since I didn’t have any applications handy, I just copied the “Internet Explorer” icon so that I could run IE 6 from my Windows 7 machine.  It’s really freaky to see IE 6 and IE 8 running side-by-side:

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Very nice.  Just make sure you are using machines that support Intel VT or AMD-V – required for the new Virtual PC to work.