When it comes to running the new XP Pro Mode on Windows 7, the host OS must be on physical hardware that has hardware virtualization enabled in the system’s BIOS.
Hyper-V, VMWare, Virtual PC, and other virtualization products running Windows 7 in a VM will not allow for us to test the new XP Pro Mode in Windows 7.
The download on Connect shows that with the:
NOTE: Windows Virtual PC requires processor (sic) capable of hardware virtualization, with AMD-V™ or Intel® VT turned on in the BIOS.
The link in the screenshot is the actual link in the above quote but it is not live yet.
Microsoft Small Business Specialists
Co-Author: SBS 2008 Blueprint Book