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SQL Server 2008 and SQL Server 2005 are supported.
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SQL Server 2005 and 2008 are now supported for SVVP certified vendor configurations. Many virtualization vendors are committed to participate in the program. Please refer to the link below for more details.
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Yes, there are many customers who are already using Microsoft virtualization product and solutions. Please refer to the link below for more details.
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There are overheads associated with virtualization vis-à-vis a native environment. However, in most cases these overheads are acceptable especially compared to the benefits of virtualization. For more details on some of these overheads, please refer to the following whitepaper.
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The scenario best suited includes departmental applications for better manageability and improved HA needs, application development environment for manageability and ease of provisioning and departmental applications for consolidation of multiple applications to maximize ROI and lower TCO.