I've been playing lately with a lesser-known feature of Virtual PC called a Differencing Disk.  Essentially, this feature allows you to have multiple virtual machines that drive off of a single 'base' virtual hard drive (vhd).  You can, therefore, set up your base OS on a stand-alone VPC and then create a “differencing disk” over it.  All of your changes get written to your disk and not the base.  In fact, it's recommended that you go and mark your base disk as readonly so you don't inadvertently alter it, thereby causing your differencing disks to run amok.

A major advantage of this approach is you don't need to have multiple copies of your OS VPC floating around.  They tend to get very large, very quickly.  Case in point, I have a VPC that I use that is roughly 10 GB.  Making multiple copies of that beast to test various configurations and changes is nightmarish and takes a frighteningly long time to copy.  This approach is so much more manageable.

Provided multiple parties have the same base VPC, it also gives you the ability to share your changes/differences seamlessly and with a much smaller, more manageable footprint.  It's easier to download a 250MB archive than a 6 GB VPC image.

The steps to create a differencing disk are pretty easy:

1. Create a new Virtual Hard Disk (File --> Virtual Disk Wizard).  Note, this is NOT the same as creating a new virtual machine.  When creating a Differencing Disk you must create the disk before you create the virtual machine.
2. In the wizard, select 'Create a new virtual disk'.  Click Next.
3. Select to create 'A virtual hard disk'.  Click Next.
4. Identify the location for your disk (this will be the differencing disk storage location).  Click Next.
5. Select to create a 'Differencing' disk.  Click Next.
6. Select the base VHD file - the OS disk to base your differences on.  Click Next.
7. Click Close.

NOTE:  I also found this great resource which identifies the steps above graphically: http://dotnet.org.za/matt/articles/2413.aspx  Way to go Matt!  Great resource.

At this point, you simply need to create a new Virtual Machine using your differencing disk you just created as the hard drive.

It's pretty easy and it makes working with VPC much more of a pleasure.  Your hard drive will thank you - and so will your customers/team that can use your differencing disk without having to download a whole stinking image.