A while back I blogged about testing VirtualBox. At the same time we've tested Windows Virtual PC, and it's been disappointing pretty much across the board:

1. It doesn't run on our company's Lenovo T61's, which displays some vague error message. Since most of our developers have a T61, this means they can't use it at all. Virtual PC 2007 and VirtualBox run fine, so it isn't clear why WVPC can't. We have some different machines where it does work, so we went on testing on those to see how well it works, in case Microsoft steps up and fixes the T61 problem and starts supporting 64-bit guests. See the remaining points for my experience...
2. The integration features of WVPC suck. Even something simple like dragging a file from the guest to the host or vice versa doesn't work. The reason is that with Integration Mode enabled, you're actually connected to the guest through Remote Desktop Connection. Microsoft has done this to leverage some of the advantages of RDP (as Ben Armstrong explains), but IMHO they should find a different way to do so.
3. Starting/stopping a guest takes forever, and renders my laptop inoperable while doing so. With VPC 2007 hibernating or restoring a hibernated VPC with 1.5 GB of memory takes several tens of seconds, but I can easily use all other applications while doing so. WIth WVPC just restarting a hibernated image tages 3-5 minutes and during that time my other applicaties are pretty much frozen. I can get a cup of coffee (if I'd drink coffee), eat a sandwich, and go to the John, during the wait. I have no clue why this works as bad as it does, because VPC does this perfectly fine.

The only thing that's been a positive experience is the performance once it has started. That said, I can't really tell if VPC 2007 or VirtualBox work better or worse, so I can't even praise WVPC on this point.

So for now it is back to VPC 2007, with our final decision on switching to VirtualBox postponed until we really need 64-bit support.

On a side note, we've been trying to get the open source version of VirtualBox working, and that appears to be quite a challenge. There are no binaries, so you need to compile yourself. Even though we have a recent build, getting all the prerequisits is hardly possible. Some of the needed SDKs are no longer available. Our conclusion up until now: the open source version is  not really viable (at least for Windows), and possible only there for marketing reasons ("see, we do open source").

I've been a proponent of development inside virtual machine for years. At my previous employer I pretty much moved the whole dev-department from host based development to VM development in 2004 when Virtual PC 2004 came out. Up until now I've always been pretty happy with Virtual PC considering its cost-benefit ratio (it's free and only was only slightly less powerfull than paid offrings from other vendors). However, with Windows Virtual PC Microsoft has seriously dropped the ball. Where all hypervisor based VM software enables you to run 64-bit guests, Microsoft only supports that with Hyper-V on Windows 2008 Server. Since we're not letting our devs run Windows Server on their laptops for several reasons, this is rapidly becoming a problem. Windows 2008 R2 is not available in 32-bit and SharePoint 2010 will also not run in a 32-bit environment. Because of this we've been forced to look for alternatives. VMWare Workstation was our first bet, but it'll take converting all our current VHD images, and I was not really impressed by the overall performance and manageability. Today we started testing VirtualBox and I'm impressed. It'll run our existing VHDs natively, also those that use differencing disks. In fact, the media manager makes it very intuitive to work with differencing disks and shows you the disk hierarchy. It also runs very smoothly, even before installing the add-ons in the virtual images.

VirtualBox comes in a free open source version that you'll have to compile yourself (how hard is it for Sun to also post the binaries?). It lacks some features, such as USB support, but we don't need the additional features. Even so, we are still considering the commercial license just for ease. It's only $50 per machine, with $30 for a subscription (starting at 50 users minium, so not for us though). Unless Microsoft steps up its Virtual PC development and offers 64-bit support within the next six months or so, we will likely move to VirtualBox.