This weekend Eric Lai of Computerworld attempted to describe the possible relationship between Vista's DRM and Microsoft's licensing restrictions against virtualization. The view that Microsoft's prohibition stems from fears that users will circumvent DRM isn't new, but the article comes at an opportune time: Microsoft came within an inch of reversing their position last week, but then backed off. The time is ripe for more speculation as to just why Microsoft says "no" to the virtualization of those two OSes, yet allows virtualization of other editions of Vista. I think Lai's contribution to the discussion is interesting, but I'm not convinced that DRM has much to do with the issue. In fact, I'm fairly certain there's a bigger concern at Redmond, and it has nothing to do with DRM, and everything to do with the long-term fate of Windows. More on that in a minute.
Lai says that Microsoft might have got cold feet over virtualization because it can be used to circumvent DRM. Recall that Vista provides end-to-end "protection" for DRMed content, from the files themselves all the way to encrypted pathways to output devices. A virtual machine (VM) could ultimately allow for uninhibited copying since the entire machine and user environment is copied and virtualized to such an extent that the protected media paths and their adjacent parts would all "look" like the original authorized machines to DRMed content. You could thus make identical copies of the content by copying the entire virtualized environment.
There are three major problems with this thesis. The first is the most obvious, which is that trading multi-gigabyte virtual machines with friends so that they can access, say, video tied to a specific machine is a little onerous. "Pirates" aren't idiots. They're not going to be swapping VMs when they can get unencrypted content online, anyway. Swapping any amount of secondary material (VMs, keys, etc.) is more work than USENET or BitTorrent, that's for sure.