We have a couple of VM servers that house production SQL environments. Our corporate accounting system, a bug tracker, and an on-site inventory management system are all on VM SQL... That works well for us for they are very low usage/volumes. The corporate accounting system is the biggest with a little over 1GB...

That being said, I am familiar with a company that is running a 660GB email tracking system on a virtualized SQL box. Its performance is pretty abysmal. I wouldn't recommend any system more complicated than a recipe look-up on a virtualized box.