Since I use Virtual PC 2007 quite regularly, and was unsuccessful in portabalising this myself (Even with Thinstall! Thanks to MSXML 6 and it's great annoyances - but with XP SP3 we wont have to worry about this
) I was quite excited to see the thread title.
After having downloaded it, I can't seem to extract the files.
Can you confirm, is the password !xander_cian! or xander_cian? Alternatively, can you upload a zipped version with no password?
And I don't understand this point - "This is a NSIS style solution! Definitely not stealth!", as all the NSIS portable wrappers I write are indeed stealth. Can you please explain what you mean?
And yeah, source code is pretty much a must for stuff like this. You don't want to be accused of hiding nasty stuff in your programs (Check out the website of the original author of Portable Pidgin, not the PortableApps.com version).
As regards the legality - I'm pretty sure you aren't allowed to redistribute the Virtual PC files. Perhaps you should do this the same way as pHamachi/Buri and Portable Foxit Reader do, distribute the wrapper and ask for the user to download the actual program themselves.