Obviously you need to get the vhd (which works on vbox, hyper-v, real HW, and even vmware) The point is that on vbox you can configure it to mimic the VirtualPC bios, so you can keep the activation w/o changing the product key. Vmware can do the same thing (automatically) but only on W7 machines where you have a legit XPmode installation.
I got the original Windows Update website to work on XP Mode, much better than WUMT which takes 30 minutes each time to search for updates.