I use Windows in a VM on Linux a lot. We have some old vb6 code that I get to maintain (lucky me). I run winXP in KVM/QEMU (Debian package qemu-kvm). Example command-line (kvm manpage):

truncate -s 50G winXP.img    # create an image
kvm -hda winXP.img -m 2048 -monitor stdio -net nic,model=rtl8139 -net 
+user -usb -cdrom /dev/cdrom
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I run a samba share on the host (10.0.2.2 by default) for sharing files between host and VM. Never had any problem with speed or reliability of the VM or the file sharing.

I keep my images as plain "raw" images (which will generally be sparse in Linux) so that I can occasionally re-sparse them using partclone and ddrescue when they get too big. If you use the qcow2 file format, the files will keep growing to the size of the virtual disk since TRIM isn't handled by the VM filesystem code (I believe this is still true; though it wouldn't be issued by winXP anyway).

I also will often use a temporary image with a "backing file". The temporary image will only store files changed (so is quick to create and doesn't get too large) and the backing file will not be modified. The temporary file should be in qcow2 format. After setting up winXP.img, you can try out experimental stuff using (qemu-img manpage):

qemu-img create -b winXP.img -f qcow2 temp.img
kvm -hda temp.img  ...
rm -f temp.img
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Update: punctuation and minor wording