I don't know of anyone doing it with VMWare on the PC so please comment if you have it working with VMWare. Everyone I have talked to trying to run virtual machines on Windows were using Virtual PC and one person I know tried it with Parallels on the Mac. I am running the latest version of both OSX and VMWare fusion and I have no trouble with the Windows Phone 7 development tools or the emulator. The comment is always because the emulator is a virtual machine itself and you cannot run a virtual machine inside a virtual machine. I have heard several people comment that they cannot do Windows Phone 7 development in a virtual machine because they can't run the emulator on a virtual machine.

I'll not touch on the massive benefits of having your development environment in a virtual machine, but there are many. NET development on my MacBook Pro running Windows 7 in a virtual machine. I have done a small amount of development for the up and coming Window Phone 7 and I am excited about the new platform as are quite a few other people.

Windows mobile os emulator for mac