A couple of my colleagues and co-workers keep on asking me questions on how successfully installing the December CTP Release of Visual Studio Team System. Though I'm running a two-VPC setup configuration since a couple of weeks, I'm sure this excellent MSDN article by Dave Bost will help you out. The article is a step-by-step guide on how to install and configure the latest release of Team System in a virtual environment using Virtual PC 2004.
Dave even covers how to setup a base virtual machine making use of the System Preparation Tool 2.0.
I guess that now everyone interested to see how Visual Studio 2005 Team System can help you manage the application software lifecycle can give VSTS a try. No excuses anymore!