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I've just finished installing the new Windows Virtual PC/XP Mode Betas on my Windows 7 RC. I'm seeing the windows security warnings in the virtual environment, and also when I launch a virtual application. I'm running Avast Professional on the Windows 7, but should I install on the VM as well?

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Take a look at the Microsoft Q&A on Windows 7 and XP Mode

Specifically they say:

... It is not pre-configured with anti-virus or anti-malware software, which is recommended.

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Yes you should, you don't want your VMs getting infected with nasties.

VMs are just as vulnerable to viruses and spyware ans real computers. Odds are you are going to run some old random programs from the internet on your XP VM. You want to catch the infection as early as possible. If your AV on your Vista machine misses you want to catch it on the XP VM.

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