Virtual PC 2007 is a great improvement over VPC 2004, since it fixes a number of bugs that caused problems, and overall, it has been working very nicely for me since RTM. However, two issues drive me nuts:

1. Whenever the Clipboard sharing between the host OS and the guest OS breaks down (meaning you cannot copy on one and paste on the other). When this happens, it usually means that certain clipboard operations will fail even locally within the guest OS (for example, trying to copy or paste an image within the guest OS will fail).
2. Whenever the Ctrl key gets "stuck". Whenever this happens, if you switch to the Host OS and then give focus back to the virtual machine, it's as if the Ctrl key was pressed, causing all sorts of problems. Hitting a few keys and the Ctrl key a few times usually will un-stick it, but it's a pain in the neck. I've been on the verge of breaking my keyboard a few times today already because of this issue!

Virtual PC