Microsoft just released a beta version of virtualization software designed to run legacy (XP and 2000) apps better within Vista. This has been released no doubt as a stop gap measure to appease users with never ending Vista headaches until Windows 7 comes out.
Here are two immediate issues I see
1) Installing a MS app to fix another MS app is like trying to cure your cancer by injecting yourself with HIV
2) The question isn’t whether your applications will suffer a performance hit, the question is how much.
If you need to run XP applications so badly wouldn’t the better option be to not install Vista?
Here is an article about it.