I put the Windows 7 Release Candidate as a dual boot with Vista on my laptop, then installed Windows Virtual PC and XP Mode. I was happy to have no problems. Then decided to reinstall Windows 7 as a guest on the Windows 7 host OS, to see how well the new USB connectivity worked, and also to see whether now Microsoft's offering for virtualization supported the neat Aero effects of Windows 7. Great! It did!
You can see the result in this article on my web page (first screenshot): Windows Virtual Pc: Creating a New Virtual Machine
Now my question: Has anybody found news on whether or not Microsoft plans to a) make Windows Virtual Pc available in the future for XP and Vista? and/or b) update Virtual Pc 2007 so it supports USB and Aero?