Virtualization for dummies

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I'm planning on taking a plunge into virtualization. I need to retire an ancient server, and I'm about to order a new kit to replace it. Given that it's new hardware, I expect to get something that supports hardware virtualization (it's going to be a real server, and not some consumer-oriented kit from OEMs that bastardize the BIOS into disabling hardware virualization), so rather than setting aside a separate partition for Windows, I think I want to try to run it in a virtual instance.

Hopefully, nobody will tell me that for some reason or another there would be some compatibility problem loading the original CD of Win XP Home, then updating it to the current SP3+all patches. Also, can someone clarify for me how the virtual display works -- would the virtual machine run in an ordinary window, or does it take the entire display, with a hotkey to flip between the virtual machine and the host OS.

Also, how does networking work. I'm guessing that the virtual machine would have an IP address on a separate netblock that the host OS sees as a virtual network interface, so the Fedora host will need to have IP forwarding enabled, and other machines on the real LAN segment will need an appropriate routing table entry.

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