I agree: Why? Seems kinda silly.
I'd suggest installing 32-bit XP and 64-bit Windows 7, as I have done under VMWare Fusion. Personally, I wouldn't bother with Boot Camp, unless you have something that just won't run in a VM.
I'd really urge people to go with the 64-bit Windows 7. It runs much faster than the 32-bit (because VMWare can use the VT extensions, which it can't for 32-bit OSs), and the "missing 64 bit drivers" issue is a non-issue when running in a VM, and since the "hardware" is all virtual, VMWare provides all the necessary drivers. So, no missing drivers for your "hardware".
32-bit XP for maximum compatibility, and because that's what most people have anyway.
Suggestion: the Windows 7 Family Pack is a great deal - 3 upgrade licences to Windows 7 Home Premium for $149, and it comes with both 32-bit and 64-bit media. Stores are all out of stock, but you can order directly from Microsoft, and it will arrive in a couple of days.
Installation hint: I first did a clean install of XP into a VM, brought it up to date, etc. Made a backup just in case. Now, you don't want to try to "upgrade" that VM. Instead, install Windows 7 into a new VM, but before installing, attach the XP virtual disk as a second hard disk (select the option to use it in place, rather than copy - make sure your XP VM is shut down before you do this). Do a "custom" install, and choose your empty partition from the new VM to install into. Windows will see the XP partition to verify that you qualify for the upgrade, and it will install with no trouble. There's a lot of misinformation about the 64-bit SCSI driver - ignore it, assuming you have VMWare 3.0 - it's all about the previous version. As long as you select Window 7, 64-bit from the menu, it will just work.
Loads of misinformation on the net about the "upgrade" process, as well. It doesn't have to "install over" XP, which is the terminology used in misinformed article after misinformed article. It simply needs to find an attached disk (internal, USB, virtual) with an installed and activated copy of XP or Vista when you do a "custom install" and it will install in one step, with no need for a "double install" or any registry nonsense.
Oh, yea, remember to activate. I didn't get prompted to do so. Just find Activate in the start menu. Once you've done so, you can shut down the VM and detach the XP virtual drive.
Technically, you then have to remove your XP VM, unless you have an additional unused license. (As I do.) You consumed the XP license when you upgraded. I guess that would be the only advantage of running the built-in XP VM in Windows 7.
I've read horror stories about speed. I haven't found that to be the case - it is quite zippy on my late-2008 aluminum Macbook with 4GB RAM. I've read some comments that Windows 7 actually runs quite a bit slower (in VMWare) when installed in a BootCamp partition.
One final hint: first make an ISO image of the DVD. The install will go much faster. Total installation time was about 20 minutes.
FWIW I also have Kubuntu 9.10 (64-bit, of course) installed in a VM with similarly satisfactory results.
Ugh, sorry, this probably should be a new thread. Maybe I'll do that tonight.