This is actually kind of funny. I use Virtual PC 2007 when I have to under Vista, but I prefer VMWare Server and version 1.01 seems to run under Vista if you don't mind an initial slow startup. I used the VMWare Converter to take the IE6 VHD from Microsoft and converted it over to a VMWare image.
Since the "hardware" had radically changed, XP said it had to be reactivated, which means they used a Retail version of XP for the VHD. When you try to activate that copy of XP over the internet, it says the key is invalid and that it is an unauthorized copy. I'm not sure why but I found it a bit amusing.
I didn't have a real reason to do this, other than I was curious if it would work or not. Of course, I could always take a snapshot and always revert to the original when the XP install expires, or use my normal test images.