Lately, Ive been toying around with some virtualization software that will allow me to run an OS in Virtual mode. The software Im using is called Virtual Box. While it is quite handy (not to mention Open Source), one thing I dont like about it is that it doesnt support a tabbed interface. However, VMWare now has a free VM package that supports tabs, as well as a VM Converter that will allow you to convert a physical installation to a virtual install. I have not yet tried this, but am itching to get going on that, as it might be helpful later. Ive seen several of our customers at work do this while moving servers around, which is pretty handy. The only thing I will tell you is that it does require a bit of RAM. If you're going to do this, I would suggest having at least 2 GB of RAM available. I wouldnt allocate more than a GB of RAM to each VM you have running. 4 GB would seem to fit my needs perfectly right now, as I would like to be able to run two VM's at one time, to simulate a small network for some test setups.
This is also handy if you're thinking of switching to Linux, as you could run Linux in a VM until you feel comfortable enough to run it as your host OS. The other nice thing about VirtualBox is that its cross platform, so you could run it on Linux as well as Windows.