If you make it an Iso, you can tell it to boot from the ISO.
VPC2007 can grab an ISO, i think it's something along the lines of options->capture iso (once you've booted the VM up). It needs to be in ISO format or a burned bootable disc to boot from, unless you already have a VHD/VMC combo built, in which case you just need to open the .vmc file.
Windows failed to start, blah blah blah
Info: Attemtpting to load a 64 bit application, however this CPU is not compatible with 64 bit mode.
Your CPU doesn't support it then
assuming it's the i7 980x in his sig, then i think it's pretty safe to say it does support hardware VT.
it's virtual PC that does not support 64bit guests. so grab virtualbox or vmware player. my preference is for vmware.