I think to truly test MySQL Replication it is important to do so in realistic constraints.
If you put all the replicate nodes under one operating system then you no longer have the bandwidth constraint, the data transfer speed would be much higher that what you would get if those replicate DBs are on different sites.
Everything under one VM is a shortcut to configurations, for instance it does not make you go through the configuration of the networking.
I suggest you use multiple VMs, even if you have to put them under one physical machine, you can always configure the hypervisor to make the packets go through a router, in which case the I/O will be bound by whatever the network interface has as throughput.
I can see doing it across 2 or 3 VMs
running on my computer, but that would
really bog down my system.
You can try and make a few VMs with JeOS (Just Enough OS) versions of the operating system you want. I know Ubuntu has one and it can boot on 128 RAM, which makes it convenient to deploy lots of cloned VMs under one physical machine without monster RAM.
Next step would be doing the same thing on a cloud (Infrastructure as a Service, IaaS) provider, and try your setup on different geographical sites.