Virtual Machine Manager requires .NET Framework 2.0. If you have trouble installing .NFW 2.0, you may find this KB Article helpful: http://support.microsoft.com/kb/908077/en-us?spid=8291&sid=global

The most common fix BTW is:

Unregister and then reregister Windows Installer

This action corrects most situations. Additionally, this action does not affect any currently installed programs that use the Windows Installer.

1. Unregister Windows Installer. To do this, click Start, click Run, type msiexec /unregister in the Open box, and then click OK.
2. Reregister Windows Installer. To do this, click click Start, click Run, type msiexec /regserver in the Open box, and then click OK.

This worked for my XP install.