A few weeks ago, my employer updated the RAM on a bunch of our machines to 2GB. The reasons was so we could do our development using virtual machines. I haven’t done development work this way before (probably because I never worked anywhere before that gave you enough RAM).
So far, it’s only been a bit different than working with everything directly installed. Visual Studio 2005 is a bit slower (of course). The other minor inconvenience is that I can’t add new users to TFS from my virtual machine. I suspect this has more to do with it being configured incorrectly than with the virtual machine not being part of the domain. Access to network shares is virtually unchanged, since you can map network drives and connect using a different user name.