Pedro Innecco has published an step-by-step guide explaining to run a Linux virtual machine under Windows Home Server simultaneously.

Here is what you need:

• Upgraded server RAM. 512MB is unrealistic if you want to do anything with Windows Home Server besides its out-of-the-box features.
• A copy of Microsoft Virtual Server. At the time of writing this post, the last version was 2005 R2 SP1. Virtual Server is free and can be downloaded from here.
• A distribution of Linux. You can use Ubuntu however Pedro opted to use openSUSE because of the benefits it has from the interoperability agreement Novell has with Microsoft (e.g.: virtual machine additions). You can get openSUSE from here, and Ubuntu from here.

Setup Instructions

1. First and foremost, you must do a remote access to your HomeServer using UltraVNC or Remote Desktop and log in as administrator.
2. Once on the servers desktop, install Microsoft Virtual Server. Reboot the server is necessary and remote desktop into the server again as administrator.
3. On the Servers Start Menu under Microsoft Virtual Server, click on Virtual Server Administration Website.
4. Under Virtual Machines on the left-side menu of the Admin Site, choose click on Create.
5. You must now provide the initial settings of your virtual machine. Here are some of my recommended settings for a simple Unix Server[…]

Full Guide

Source:→ WGS