Windows 7 has an upgrade to Virtual PC which allows you to run Windows XP applications virtualized on your Windows 7, without having to run the whole desktop running.
I still have to use Visual Studio 2003 to support some old good applications including SharePoint 2003 apps. So I have used a Windows XP virtual machine to run it, but now I can fire up Visual Studio 2003 directly from my Start menu in Windows 7.