I had this problem, but I finally fixed it after working on it for a long while. What happened to me, and to you, is that there is 4-5 versions of Virtual PC. Not all versions come with XP to install on top of Virtual PC. (They cost more $$) The one that my work gave me to install was the Virtual PC WITHOUT a Mircosoft operating system to go with it. So I had to find a seperate BOOT Disk CD version of XP to install a new operating system. Trying to use non-CD bootable version of Windows 95 and 98 did not work.
Anyway, Virtual PC sucks. Its slower than dirt, took me 6 hours to install the professional version of XP on my Powerbook G4, and it takes up 3 Gb of space. I cannot even put it to good use by trying to run some old games of mine. I only use it to run a worthless required training program. Otherwise, it will be gone soon.
DD