I don't think SQL licensing is that Virtualisation friendly, each virtual server still requires a SQL Server license

"Software run in a virtual OS environment is licensed based on the number of virtual processors used by that virtual OS environment, rather than all the physical processors in the server.

oIf you run the software in virtual OS environments, you need a license for each virtual processor used by those virtual OS environments on a particular server—whether the total number of virtual processors is lesser or greater than the number of physical number of processors in that server.

oIf you run the software in a physical OS environment, you need a license for each physical processor used by the physical OS environment."

I have gone down the multiple instance cluster method of consolidation (the one big box one instance form of consolidation is too scary a prospect for me). I have a 4 node polyserve cluster currently running 32 64-bit SQL 2005 instances. Looks expensive but considering the my company used to buy seperate hardware and licensing for each app and SQL instance it soon starts to look as cheap as chips. Over an above the the 'one big server-one instance' this actually scales as well.

Chris