Generally no, this isn't possible, but Sun Microsystems I believe recently came out with a VM that can do this. I can't guarantee that it will run on Windows, and I can't even think of the name at the moment, but it can't hurt to look into it.

Also, as I understand it, that free Windows 7 beta Microsoft is offering requires you install it over Vista, so it might be a moot question if you're running XP.