QUOTE(Ezrem @ Dec 15 2005, 12:30 PM)
That would only be a better way if you enjoy poor performance, assuming Media Center would even run in a virtual machine (which I doubt). There would certainly be no way for the virtual machine to directly address the PCI TV Tuner you would need to install for full MCE functionality. If you're just looking to stream existing video, it MIGHT work, but would probably not have very high performance.
The external hard drive (or internal hard drive with a proper bootloader setup) would be the right way to go.
An 80 gig hard drive would be the minimum size to go with, as recorded TV comes in at around 3 gigs/hr.
media center DOES work under virtual pc, but you lose a few options..
1: no tv tuner, but you can use it without one
2: no 3d acceleration (not like you're going to use it)
3: unless you have another nic installed, prepare to slow down your connection.
other than that, it should work fine (using the 360 with it)