I am running what I think is a fairly standard Agile C# development environment. Vista SP1, Visual Studio 2008 with Resharper 4.1, SQL Express 2008, Subversion server, command line svn client and Cruise Enterprise (unbelievable product) with 1 server and 1 agent for continuous integration.
I am running on a Dell XPS core 2 duo 2.4Ghz laptop with 4GB of RAM and 1 external 22" widescreen monitor.
I have tried and tried and persisted with VMWare Workstation (mostly but also Virtual PC) but I again and again resort back after tiring with the performance and annoying delays in Visual Studio. And I have tried every performance trick and tweak in the book available to me. It apparently just needs either more hardware than I have or far more patience.
I have also tried running 64bit Ubuntu with VMWare Worstation server running Vista (vlite'ed) and also windows XP (lite), but I found it just as annoying.
If you have similar specs to what I described then I can simply recommend not going down the VM path, unless it is ABSOLUTELY necessary.