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Preferred order to upgrade host:
 

There are three steps and you should perform them in this order:

1.       Ensure Virtual Machines are ready for the update

2.       Update the Host

3.       Update the Guest Integration Services

                                                                                       

Step 1: Ensure Virtual Machines are ready for the update. Completely shut down (not save state) your virtual machine and merge snapshots. Saved States are not compatible between different Hyper-V versions.

 

Step 2: Update the host. Install Service Pack 1 on the parent partition. Restart when prompted.

 

Step 3: Update the Guest Integration Services

1.       VMs running Windows 7 and Windows Server 2008 R2: Update the guest operating system with SP1. Updating the guest OS with Service Pack 1 will, in turn upgrade the Integration Services

2.       VMs not running Windows 7 SP1/Server 2008 R2 SP1: (e.g. Windows XP/Vista/7 RTM/2000/2003/2008/2008 R2 RTM) For other operating systems you will need to upgrade their Integration Services. To do so:

a.       Start the virtual machine connect to the virtual machine and go to the Action Menu

b.      Select the bottom menu option Insert Integration Services Setup Disk. You will then be prompted to run the Integration Services Setup. Do so and Restart when prompted.

 

 

 

The two most important developments in SP1 for Windows Server 2008 R2 are:

Dynamic memory

lets Hyper-V administrators pool available memory on a physical host and dynamically distribute it to any virtual machine(s) running on that host. So as the workloads on that physical workload change, requiring more or less memory, Dynamic Memory will let administrators change the memory allocation to their VMs without service interruption. For a deeper look at Dynamic Memory check here.

RemoteFX

enhances Microsoft desktop virtualization. RemoteFX lets Windows Server 2008 R2 administrators provide an even richer and user-transparent desktop virtualization experience. RemoteFX delivers rich content, independent of any graphics stack, to server-hosted virtual and session-based desktops, allowing them to support any screen content, including full-motion video, portable graphics stacks such as Silverlight, and 3D applications. Because it can use virtualized graphics on the server and advanced codecs , RemoteFX can deliver those experiences to a much wider array of target devices, including standard desktops and laptops but also an emerging slew of thin clients. You'll also be able to forward the USB ports of the local client to the virtual machine being accessed on the device - just like you can forward the local printer over RDP today. [UPDATE - see Max's new blog post on partner support for RemoteFX]

Make sure you check out the new SP1 Beta Resource page on Microsoft.com as well as the TechNet SP1 page -- and don't forget to grab the download here.