VMWare as an isolated test bed?

You can run infected files in VMware fine, it won't affect your actual PC and windows install. Just the Windows XP install which you created inside VMware, as it basically acts as a different PC inside your current PC.
 
If you are planning to connect the virtual machine to a network then you may have some problems. Other than that I can't see any problems at all.
 
Yeah man, its how we actually analyse malware. Just throw the vm away afterwards. Only thing you got to be careful with is the networking options. Ideally you want to disable networking unless you need it.
 
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