There is no way in hell that I'll ever allow anyone in a company that I work for to install the system databases (or any other database) on the same drive as the operating system whether it's a VM or not. There are just too many things that can go and have gone wrong. For things like clustering, it can be a form of severe aggravation and death by SQL. 😉
--Jeff Moden
Change is inevitable... Change for the better is not.