I've used servers in virtual environments for a while now. Aside from some communication issues (which I hope were cleared up by subsequent versions of VMWare) and vendor requirements that preclude using a VM, my experience has been very good.

The only stumbling block I've run into is over-tasking the host. VMs provide economies of scale, but you have to perform a tightrope act between maximizing your VM investment and compromising the performance and/or stability of VMs on a host.

When I joined my current employer, they provided a VPN connection, but had some onerous requirements for the connecting PC (e.g. I refuse to install Norton). Solution: VMWare Server, running a bare-bones configuration. Fortunately we've moved on to a more accommodating VPN configuration, but the virtual machine was the answer at the time.

I personally miss VMWare LabManager, and hope we obtain a similar solution in the near future.