I'm using Virtual PC to play Baldur's Gate for Win95, and Civ2 and Col for Win3.1. The good thing about Win9x is that it runs Win3.x programs natively as well as DOS ones. I could install Win3.x programs in my real XP machine but they would use ntvdm.exe with huge processor usage, and they need admin rights.
VPC runs Win98 as fast as a real machine in my computer (2.8 GHz dual core, enough RAM assigned to the virtual machine). I'm not sure but dual core might be very advantageous to run virtual machines; anyway assigning enough physical RAM to each virtual machine is enourmously important to get decent performance. I've been observing less processor usage since I updated my VPC 2007 with its SP1.
A virtual machine is very handy and it lets you make manual system restore to any machine, just backup its virtual hard drive file. Keep in mind that a virtual machine on a virtual hard drive file can have two levels of fragmentation (in the virtual drive and in the file on a real drive that contains the virtual drive), and both at the same time would have multiplied effects. You can defragment your virtual hard drive file without need to defragment your whole real drive every time, with programs such as
Contig. And of course keep your virtual hard drive defragmented with a defragmenting tool installed on the virtual system (any version of Windows includes one that's good enough). Of course you only have to fix defragmentation after installing new software etc.