I’ve been setting up VMWare ESX Server at work, and it’s quirky, but I like it. I shut it down improperly once (logging into the console on its Linux-based host OS and doing a shutdown -h now resulted in a system that wouldn’t boot anymore) so I’m afraid of what may happen. The upside is since every virtual machine is just a collection of files, disaster recovery is dirt simple: Build a VMWare box, restore those files from backup, point the VMs at them, and you’re back in business. No more need to worry about locating identical or close-enough-to-identical hardware. For that reason alone, I’d advocate running all of my Windows servers in production environments on VMWare, since Windows isn’t like a real OS that will allow you use a disk or image on dissimilar hardware with minor adjustments. We get some other benefits too, like allowing us to put all the toy servers in one box with RAID to protect us in a disk crash. We’ve lost far too much to disk failures on desktop PCs recast as someone’s pet-project server.
It also appears to try to only allocate to machines the amount of memory they’re actually using, so theoretically, if you were doing server consolidation and had, say, four servers with 256 MB of RAM, you could potentially get away with putting them on a VMWare host with less than 1 GB of memory.

I also like VMWare for tasks you don’t like to dedicate a single machine to. For instance, DNS on NT is totally brain-dead. It’s slow to propogate. It works about 99.9% of the time, but that .1% of the time that it feeds wrong answers will infuriate somebody, who will holler at you, and the struggle to fix the problem will infuriate you worse.

If you want DNS that works, your best bet is to load Linux or BSD with BIND on something and use it. But if you don’t already have a production Linux server somewhere and you don’t have a machine you trust to give the job, carve out a server on a VMWare box. Allocate 16 megs of RAM and a couple hundred megs of disk space to it, and give it a thin slice of processor time. DNS lookups don’t take a lot of power, so it won’t detract noticeably from the other hosted servers.

It ain’t cheap (the price isn’t listed on the web site for a reason), but software’s cheaper than hardware.