About six months ago, after having an agonizingly slow development environment, I switched to VirtualPC's and have not looked back since. I use a 768 Mb VPC for DNN and can happily run VS2003, VS2005, IIS (don't care for Cassini) and SQL Studio concurrently. The key to performance I discovered after much experimentation was a combination of two things --
1) Defragmented disk -- I have the disk defragmenting in both host and guest PCs automatically whenever the computer has been idle for more than an hour, and
2) Leaner Registry -- by not installing Office and other registry bloatware, everything is just so much faster. Other performance sappers included Acrobat (replaced with Foxit Reader), Norton Anti-Virus (replaced with NOD32) and Daemon Tools (replaced with MagicDisc).
Also, the host PC has no third-party apps which has the added bonus of near-instant bootup. After living in this Utopia, I can confidently say that I am never going back to a non-VPC environment. I will be happy to share additional details about how to setup and optimize VPCs for DNN development if anyone is interested.
Nik