Since Virtual Server has been released, I got asked the question several times so I figured I’d put the answer here where everybody can find it. Knowledge Base Article 842301 says something like:

Current released versions of BizTalk (2000, 2002 ,2004) in any flavor (Enterprise, Developer …) are “best effort support” on virtual machines (Virtual PC and Virtual Server). Any case opened with Microsoft Support will be supported on a best effort basis and you may be asked to reproduce the problem on physical hardware during the course of troubleshooting the issue.

Not supported does not mean that it will not run: it may very well run fine or you may run into subtle issues. Not long ago a Microsoft Technology Specialist attempted to run BizTalk on a three weeks development project. According to him, this is not worth wasting the effort again. They ran into issues and none of them reproduced on real hardware. I am sure we can find individuals who have been running BizTalk on Virtual PC / Virtual Server without any problem so far. It probably depends on what you are doing.

If you feel lucky and want to try it out by yourself, this thread (chosen among many others) discusses some tips that might help you. While running a BizTalk server on a virtual machine for development purposes might be fine, I would definitely advise against running a production server under a virtual machine.