"XP mode" is really terrible for DOS apps.
nooooo.... use the XPmode is just one TINY bit of what Virtual PC can do: XPmode is just a pre-configured XP running in Virtual PC for people who don't know how to install an operating system.... you can launch any OS you want!
I'd recommend FreeDOS, but if you've got the disks, you can even launch DOS 6.22 or DRDOS if you want... but you may have trouble accessing some partition types beyond the OS partition and you'll waste memory loading TSR's like ntfs4dos.
There's lots of people providing the .VMC files, if you can't be bothered building your own, but it's really quick and worth doing for yourself:
Just jotted down a few notes now, while building a new FreeDOS1.1 image, but the expectation is that you know your way around DOS and a PC in general, so PM me / shout on this thread if I've lost you:
Go to http://www.freedos.org/download/
and download the latest ISO (DOS on a CD, who would have thought!!) - do NOT burn to a disc!
From the start menu, Launch Virtual PC and create a new Virtual Machine, then right click: Settings, DVDdrive, change the setting to "Open an ISO", also change memory down to 16Mb / 32MB... (even 4Mb is fine, especially if RAM is tight!), but my last pure DOS machine had 16Mb Extended RAM and 16Mb Expanded RAM, so I normally set 32Mb, but probably never use more than 2Mb....
Not sure if it matters, but I'd recommend setting the virtual HDD to "fixed size" and a FAT friendly partition size (e.g. 1024Mb is usually plenty).... it's only a 40Mb CD, so a FULL with every extra tool and utility ticked will leave you with >950Mb free! I know I've started a setup on a 128Gb expanding FAT32 partition before, but restarted as I figured I'd rather control it manually.
Now boot (double click) the Virtual machine, choose the FDISK option and create a "large" (FAT32) partiiton using 100% of the disk, on reboot, if you've only got the one virtual HDD (default) and there's only the one partition, it will already be active, but when you reboot, you will get this error: "Partition Signature !=55AA".
The error is because you now have a valid partition higher in the boot order than the CD-ROM, so it's trrying to boot off that: switch the VM off (close the window, choose "turn off").
Start the VM again, hit DEL fast to get into the BIOS. Go to the boot tab, boot priority: ENTER on PXE and disable, ENTER on floppy and disable, make sure CD is ABOVE the first HDD. F10 to save, then reboot, so it reboots from the CD-ROM.
Now proceed with a fairly simple and intuitive install: your first boot you should choose the Install option.... once you've gone through the full install, it will reboot and take you to the same boot screen again: Go back to the Virtual PC settings, remove the ISO image from the DVD option (i.e. eject the CD), close the VM and restart it: it should boot straight to a DOS loader screen.
Create as many copies as you want for however many sessions you want or repeat for whichever operating systems that you want...
A few years ago, I had Workgroups 3.11 running (under DOS 7.0, I think!!) in the same way on Virtual PC 2007, so I assume its still possible.
Hell, I've even got Ubuntu (Linux) running in one of my Microsoft Virtual PC sessions... just put whichever boot ISO you want into the machine: you can even launch ghost / Acronis true image off a boot "CD" (iso) or from an actual CD... and then restore an old OS off a hard drive onto the virtual image... I'd advise Acronis so you can use the portability options for driver compatibility though.