BC_Programmer
Don't know what "Reverse Compatibility mode" is. Nor am I familiar with these "blats" that are evidently a core part of Windows..
http://www.howtogeek.com/howto/10436/using-program-compatibility-mode-in-windows-7/Anyway, Windows Update probably installed "Windows Virtual PC" for whatever reason. The "blat" (by which I assume you mean the "This Program is blocked" dialog) only shows when Windows Virtual PC is installed. You can remove it through programs and Features. You will have to actually uninstall it from the "Installed Updates" feature.
I manually installed Virtual PC 2007 SP1, and forced it to install via the compatibility mode in Windows 7 when originally it did not want to install. Sometime between the last time that I used it and attempted to use it last night it seems as it broke and my assumption is that a Microsoft Update broke it with no proof to point the finger at Microsoft for breaking it, but its an educated guess given the nature of the failure and message.
Blat = Message is "Virtual PC 2007 is not supported on this version of Windows" and gives me a check online for a solution option. To where there is no solution for Windows 7.
Patio
I was thinking I was going to have to go with VMware or VirtualBox, however from what I have read they do not play well with VHD's created under VPC2007, and I would probably have to create new ones. Was hoping to not have to recreate them, but if thats what I have to do, then thats what I have to do.
I do have a Windows XP Pro machine that can run these VHD's for testing, with no problems and maybe from now on, I will have to run the already created virtual environments on that lesser powerful dual-core with just 2GB RAM vs my more powerful Win 7 system with the Athlon II x4.