A vendor is suggesting to install
Exchange, Active Directory and two
domain controllers on a single high
powered server, running Microsoft
Server 2008 with Hyper-V, using
several virtual OS to isolate the
As long as each server is in it's own VM guest, everything should run fine. I'd recommend having another server for failover/load balancing/whatever.
Is it wise?
Yes in terms of budget, but beyond that, it's not too bright. Obviously money is always an issue so if management or the powers that be can live with a little risk, than this should be seen as a short-term solution. And by short I mean no longer than 12-24 months. After that you're gambling. If the timeline is really fuzzy, buy/obtain high quality server parts to reduce the probability of failure.
When budget increases or when the opportunity arises, another server (at a minimum) should be considered for virtual live migrations and such to avoid the dreaded single point of failure.
Is it supported?
Yes, there's no evidence or vendor really saying this can't be done. I've done this with 4 Windows 2003 Standard Servers running AD, Exchange, etc. etc. on one VM host. As long as the hardware is within the specifications, just about anything is possible.
Should we consider VMWare instead of
If all of the machines are Microsoft servers, I don't see any harm in running Hyper-V. All that should be taken into consideration is features and really, it's hard to argue against Hyper-V these days.
I would ask you where do you see things going in the future and base decisions off of that. If money looks to always be an issue, I'd personally stick with Hyper-V or consider XenServer. I'll admit my bias towards XenServer 5.5 as a great free introduction into virtualization with great features and management tools. ESXi and Hyper-V both have their merits as well, but it's hard for me to assume what's better for you as your situation hasn't fully been explained.
On a side note, most virtualization projects really come down to money. I wouldn't look at this issue as so much from the technical perspective as virtualization vendor products these days are very mature, stable and reliable. So really for most businesses it's about money which is obviously always a concern but in this economy, the finances become the biggest obstacle. So do some "if-then-else" future scenarios and see if the money will be there or not and look to the vendors and see what features they offer for free, and what features are only available for money. I'm willing to bet this will be your biggest factor in decision making today.
Edit: I should've been more clear about XenServer; I'm specifically referring to the Citrix version of XenServer 5.5.