I think virtualization is great for small to medium size databases. On large databases, in size or iops, an sql database should be run on a standalone server for better performance.

If you're running a standalone node, and not moving VMs dynamically, I would recommend a linux + xen approach. I've setup a few nodes using xen and the performance is insane compared to hyper-v.

I've setup centos + xen on a 24GB box, dual cpus, 12 disk RAID-10 and only consumed 100mb of ram from the host OS. Xen is also the most physically-connected virtualization to your HDDs. I guess it's all a preference, and I will stop before I continue to ramble off.