So far, no VM has access to physical hardware in the system, but just creates a virtual set of hardware. As a result, you cannot fold on the GPU from within a VM. CPU folding, however is fine.
Next is your choice of virtual machine. Unfortunately the SMP client requires the VM to show 2 or more virtual processors, which means you are a little limited in your choide of software. VMware of some flavour (workstation if you are feeling flush, or server 2 if you want something for free!) or Microsoft's Hyper-V (as far as i know, this is only available with windows server 2008) both support virtual SMP, and the SMP client runs fine on them. If you have access to server 2008, hyper-V will give you four virtual cores on which to fold, whereas VMware server (what most people here use) will only give you 2 cores. Therefore, in order to get the max ppd from your pc, you need to run two virtual machines (each using two physical cores of your quad). If you interested in doing this, download VMware server 2 for free and have a play with making virtual machines. Its pretty intuitive, although its web interface is awful! You can however modify the interface, but i think we should save that for later!
Its pretty easy once you have the virtual machine software installed - you just need to install a linux distro of your preference and follow an online guide for setting up the client, much like you would have done for windows. I personally use Ubuntu because its what everyone else uses and i'm more familiar with debian distros than Red Hat/fedora etc. Ubuntu 8.04 is the one to go with for maximum points output, rather than the newest version which uses a kernel thats rubbish for folding!
The VMs are great - you get Linux SMP units which complete quicker and get more ppd than the windows units. Unfortunately they do pick up the same A1 core units that go to windows machines (as do native linux clients), which can bring the ppd down, but you do get A2 cores to boost your totals! For me they have been more stable, although i am currently having some issues with the newest A2 core (and im not the only one!), but they can be a bit of a pain when it comes to turning off your pc (although from your previous posts, you dont really do that often?). If you dont mind the (little) extra hassle of running the VMs, i say do it! Its great for points, stable... you have almost nothing to loose!
EDIT: I should point out that running a hyper-v based system is not really so easy if you want to fold on your gfx card as well. You could also ditch windows and run exclusively in linux if you are interested. There is no official GPU client, but some very clever folk have bodged a fix using WINE to run the client, and it works pretty well.
