Having looked in to this myself my advice would be to steer clear of running Server 2008 R2 as a Developer Workstation.
Windows 7 with Virtual PC can act as a fine development platform when your developers PC's have more than 4 Gigabytes of RAM to play around with.
If you need to provide a fuller featured environment for testing and development I would suggest sourcing separate hardware to act as a Hyper-V server for your developers. Depending on your needs and available resources you can either maintain one Hyper-V instance for all developers to use or go down the route of building individual Hyper-V Servers for your developers.
Trying to shoe horn everything on to your developers machines is a bad idea in my experience, it leads to slow machines, grumpy developers and missed deadlines.
As other people have mentioned there are other none Microsoft Tools out there to do this, as a MS House we have chosen to focus on Microsoft Technologies - your millage may vary.