one of the limitations with "XP" compatability mode is that the screen colour resolution is limited to 16 bits.
You can switch this to 32 bits by "switching off" the Integration features.
Get the Virtual PC into "Windowed Mode"
then on tools ==>disable integration
Now you can set the screen colour resolution to 32 bits.
Note - whilst the Integration features are "Disabled" the virtual PC behaves as a "Classical VM" like a VM installed under vmeare / vbox etc.
You lose direct access to the "Host Local drives" whilst in this mode unless you also reset the networking parameters.
To re-enable "Integration" again just either re-start the virtual machine or use the toos again in "Windowed mode" - enable integration features.
Working like this you've got the best of both worlds -- an "Integrated" XP mode VM or a stand alone "Classical VM" and you can switch between the two.