I was setting up a virtual network using Microsoft Virtual Server for a client with the goal of keeping the domain controller (for the virtual domain) isolated from the client's network. Not doing so would be a bad thing because nesting domains could have some ugly consequences. The idea in this particular design is that we have a domain which each node exposed to the actual network, but each node actually communicates with domain controller using the internal, loopback network. This is a somewhat advanced scenario. It is also quite common to use this technique, say on a developer laptop to have a fully functional domain that is completely isolated from the network which is great for simulating development environments.
Anyway, the prescribed way to accomplish this is to install the Microsoft Loopback adapter on the host running Virtual Server, configure it with a C-Class subnet and private IP and bind the loopback adapter to the guest machine in the DC role.
In the past, I had done this by simply selecting the Loopback adapter from the list of adapters in the Network Adapter Properties, but for some reason, the loopback adapter was not showing up in the drop down list. What is interesting is that the host machine had two physical NICS, which shouldn't have made a difference, but I was still at a loss as to why the loopback was not showing up.
I put a call into a collegue who educated me on the need to create a Virtual Network that itself is bound to the loopback and then is used to bind to the machine. This worked flawlessly.
The process then, is to:
1. Install the Microsoft Loopback adapter (covered in great detail here: http://blogs.msdn.com/astebner/archive/2004/07/06/174576.aspx).
2. In the Virtual Server Administrator console, on the left pane under Virtual Networks, click Create.
3. Provide a friendly name under "Virtual network name", such as "My Loopback Network"
4. Then for "Network adapter on physical computer:" select the loopback adapter you created in step 1.
5. Click OK.
6. Finally, in the Network Properties for the Virtual Machine, select the virtual network you just created (assuming you have already created a new adapter.
At this point, the virtual NIC on the virtual machine will be bound to the loopback adapter on the host, so you will want to set an IP within the range of the loopback adapter on the host loopback. For example, if you set the host loopback to 192.168.1.1, you'll want to set the last octet between 2 and 254.
What I will look into further is whether the fact that the host server is multi-homed has any impact on the necessity for the virtual network. Any feedback welcome...