We have done it…but it wasn’t pleasant. It would take up to 4x longer to deploy an application on a virtual server vs a physical server. Since there is a lot of IO with BizTalk….virtualization isn’t ideal….at least based on my experiences with it.
Here is what Microsoft considers the minimum hardware requirements:
http://www.microsoft.com/technet/prodtechnol/biztalk/2006/evaluate/sysreqs/default.mspx
I think they are underestimating significantly.