I am currently using VMWare Workstation 6.5 to test the Windows 7 RC build 7100, and am particularly interested in evaluating the new "XP Mode" feature. However, since one of the prerequisites is hardware virtualization support, I am afraid this might not be possible under the isolation of a guest OS. Is there a configuration option in VMWare to allow this to work?
The Win7 XP Mode only works if your CPU supports "VT" (or AMD's equivalent).
It's unlikely that VMWare Workstation will emulate or otherwise expose the VT feature to guest O/Ses running under virtualisation, such that the guest O/S's own virtualisation host will work.
I'm using virtual box and it works fine combined with my hardware virtualisation. Not sure about VMWare, but I should think it works there also, VMWare are generally on top of the latest virtualisation stuff.