When I gave up my last XP machine, I created a VM from the disk image. It worked, but the performance was poor. My XP VM on an i5 iMac was quite a bit slower than a Windows 2000 VM on my much less powerful MacBook.
It took me a while to speed things up. I removed some custom settings for the Windows swap file and I gave the VM more cores. I upgraded my system memory that helped too; I gave the VM more RAM.
Even so, I could hear much more disk activity than I liked and file saves were often slow. I don't use the VM for much, so I took my time on fixing this.
More recently, I got some help from VMware KB: Troubleshooting Fusion virtual machine performance for disk issues.
I found the VM had inherited 35% fragmentation from the old disk (I'd also made it too large). I used XP's built in defrag to fix that. Then I ran VMWare Fusion's cleanup utility, and I flipped my VM from 2GB files to a single large file.
It's fine now; as fast as I need it to be (not much!).
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