I was suggest earlier virtualization app, based on QEMU, but John has declined it by licensing issues (fmod).
what do you think about portable (thinstalled) Virtual PC 2007?
Just one file, and just it work (tested by myself).
Only 60 Mb. [linked removed by moderator PP until further discussion]
It's free and legal UNTIL YOU REDISTRIBUTE ANY WINDOWS VIRTUAL MACHINE, but no any reason to decline redist of open source VMs (Linux, xBSD, OpenSolaris).
But it has only one issue:
because virtual machines contains files, which may have size greater 2Gb (typical desktop distribution of Linux), it's recommended place to NTFS filesystem, i.e. - NTFS formatted USB drive.
But Windows Vista mounts removable NTFS drives as readonly by default. This can caused abnormal behavior of VPC and VMs. This requires add full access permissions for current user.
[removed download link for now as this may very well be illegal, we'll wait for some comments on it - moderator PP]