Microsoft has released a whitepaper for using Microsoft Virtual PC 2004 to help with development, kernel debugging and application debugging.

They write:

Microsoft® Virtual PC offers many features to facilitate the software development process. One of the classic problems in software development is that an application works on the developer's or tester's machine but doesn't work in the field. In the course of development, a developer’s machine is likely to become altered in such a manner that the system is no longer a valid environment for testing. This can happen for a variety of reasons, including elevated security permissions and versions of DLLs and software that are not present on user machines.
 
By using Virtual PC to create a valid representation of an end-user machine, developers can test application changes on virtual end-user machines instead of on the developer’s physical machine. This helps to mitigate the “works on my machine” syndrome, thus reducing overall development and test cycle times. Fixing a bug before it goes to the testing group is much faster than fixing it after testers detect it.

Sometimes a developer can’t properly test a change because a complete testing environment can be more than just a developer-class workstation with Microsoft® Visual Studio® installed. Proper testing might require changes to middleware code and end-user code, which require at least two machines. You can use Virtual PC to create test environments that are both valid and complete.

In this white paper, you will learn how to create, copy, and configure virtual machines. Creating a virtual machine by copying files, sometimes referred to as cloning a virtual machine, can introduce problems. This white paper explains those problems and provides detailed workarounds.

Download it here