Do you have WSS (Windows Sharepoint Services) Adapter installed on the virtual PC? If yes, was it installed on the root folder?
If yes, read the follg. otherwise ignore the rest:
By default, WSS adapter will try to manage the web service – You need to make a setup change to indicate that the webservice should be handled by IIS and not by WSS.
This may be one of the issues…
Howver, if the Webservice resides outside the virtual PC, the above problem will not apply here.
Thanks,
Ken