Installed Longhorn under Virtual PC 2004 last night. Despite what some people might have you believe, it works like a charm. However, you do have to configure it properly (and I don't have it installed on a powerhouse desktop, just a 1.4 ghz notebook with a little over 700 mb ram).
1. If you have a notebook, go out and get an external USB 2.0 / Firewire drive (I have the 120 GB/7200 RPM Maxtor, runs about $199 at BestBuy, so it is a sweet deal... also, make sure to convert the file system to NTFS first if it comes pre-formatted). These drives can be up to 4x as fast as your notebook drive (not to mention, they are probably a few times as large), so they are a great addition. Make sure you don't get a portable, powered-off USB drive though, because you will sacrifice a ton in size and speed (your probably looking at 40 GB / 4200 RPM for the same price). One nice thing about this is that you can put all the VPC images you want on this baby and work with them from any machine with a USB port. Highly recommended.
2. Assign the largest amount of RAM possible w/o getting the warning from Virtual PC.
3. Tell your Virtual PC to run at maximum speed.
4. During installation, Longhorn will most likely lock up during the “detecting hardware” phase. If you have sat there for more than two hours, that is a good clue, just reboot and then let it go through the process again. This may cause the VGA display drivers to be selected, but that is easy to fix.
5. After installation has completed, INSTALL THE VIRTUAL PC ADDITIONS. This is the absolute, most important step. Without the additions, Longhorn will run as fast as refrigerated mollases. This should also fix the VGA display issue (if not, just remove the VGA display adapter in device manager and reboot).
6. Supposedly, you can use the SoundBlaster 16 ISA/PnP drivers from Windows XP with Longhorn if you really want audio. I haven't had success with this, but feel free to try.