Microsoft has a new beta toolkit that will migrate physical machines to virtual ones. Here's the description in their own words.
A free, downloadable tool for Microsoft Virtual Server 2005, VSMT automates the migration of an operating system and installed applications from a physical server to a server running within a virtual machine that is provided and managed by Virtual Server 2005.
http://www.microsoft.com/windowsserversystem/virtualserver/evaluation/vsmtbeta.mspx
Sean