BizTalk Server 2006 runs great under Microsoft Virtual Server 2005 R2!
BizTalk Server 2006 works great under Virtual Server 2005 R2. When we were developing BizTalk Server 2006, I ran all tests under Virtual Server and never saw any problem.
One caveat: make sure you have plenty of physical memory (I use 2Gb), give your guest operating system at least 1600Mb. Do not remember to install the Virtual Machine additions as soon as possible - this is critical to get Windows Server 2003 (and SP1) run at full speed.