So, with a fresh newly installed laptop and the new release candidate of Windows XP mode, i gave it a whirl again. But it failed with the same sequence of completely intelligible error messages, namely “Integration features have been disabled” and the even more helpful “Parameter is incorrect”.
So i installed it on my desktop as well, where it worked without a hitch. The major difference between my desktop and my laptop is that the laptop is joined to the corporate domain and the desktop at home obviously not.
I dug a bit deeper into the event log, and drilled down to Microsoft\Windows\Virtual PC\Admin, where i found this error message:
Could not enable the Integration features for ‘Windows XP Mode’. The current mode is – 0. Last Channel start Value – 0x800700B7, Last Disconnect Reason – 0x300001B, Last Extended Disconnect Reason – 0×0, GHI State of the guest machine – 0×1
Now, this whole “disconnect” thing sounded strange until i remembered that Windows Virtual PC used RDP to deliver the screen – and at that point i thought about the RD Gateway server that’s being pushed by a GPO.
So for a quick test, i set the following key in the registry to zero:
HKEY_CURRENT_USER\Software\Policies\Microsoft\Windows NT\Terminal Services\UseProxy
And tried starting Virtual PC again. It worked! Setting the key back to 1 predictably led to the same error message.
So next i excluded Windows 7 users from this GPO using a simple WMI filter, which will be a temporary measure to mitigate this issue.
This seems to be a bug somewhere, as those settings shouldn’t break Virtual PC. I’m not sure where i should report this to, but i’ll have a look at that. At least now people with the same issue should get this solution through Google.