In my spare time I’ve been trying to get Linux installed into Virtual PC and failing pretty miserably. I’ve just discovered why.
If you look at the Virtual PC trouble-shooting questions, you’ll see one that says “The virtual machine display appears corrupted…”, which is what was happening. Buried in that little nugget is the fact that you cannot use a 15-bit or 24-bit display mode. You should use 16-bit or 32-bit only. All the Linux installs I’d seen up until this point had been defaulting to 24-bit display, which was causing the problem. So when setting up XFree86, you should use the s3 driver (S3 86c764/765) and a 16-bit color mode (I couldn’t find a way to force a 32-bit color mode, but 16-bit color is just fine for my needs).
And now you know… (I swear I was under the impression that Microsoft was purposefully thwarting Linux installs for Virtual PC!)