I use Virtual PC a lot and I typically do a new CRM build every 2-3 days. Frequently people ask me about what network setup I use for my VPCs. I prefer the Loopback Adapter - which is a software network adapter inside windows. The Loopback Adapter allows my VPC to talk to the host operating system but prevents it from escaping to other networks.

Here is a quick screencast which shows how to configure the Loopback Adapter. The video is with Vista - but it's pretty much the same steps on XP and 2K3.