I had that same problem with Virtual Pc 2007 and the Windows 7 Beta. I found this comment by someone named Hermes, which fixed the problem for me: Virtual PC Guy's WebLog : Windows 7 on Virtual PC on Windows 7
re: Windows 7 on Virtual PC on Windows 7
I just fixed the sound problem!
I turned off, disabled the sound card and started Windows 7 again and just after it starts, I shut it down.
Enabled again the sound card on virtual pc.
Removed the Virtual PC Additions
Restarted and reinstalled VPC Additions.
I have sound on Windows 7 over VPC! =D