I have only been able to install ArchLinux in to Virtual PC 2007 and Virtual Server 2005 when I use the kernel parameter "i8042.noloop". You add this entry to end of the kernel entry in /boot/grub/menu.lst. I had to manually enter on the first boot, and put in menu.lst for later boots. There is something about the way the latest kernel uses dynamic timing which VPC can't handle.
I thought I would mention this in case it helps anyone else.