Michael, thanks for your inputs.
A key question I would have concerning the choice between multi-booting and using a virtual machine, to which I don't know the answer, is whether an existing image of a base (non-VM) OS installation can be restored into a VM, and still run properly.
For example, referring to what I described earlier that I did with some of my own computers, let's say that a computer has been running XP for several years. I create an image of that "c" drive or partition, store the image file on a second hard drive, then I reformat the main drive, deleting that "c" partition, and I install Windows 7. I then set up a VM in Windows 7. If I then restore the XP image to that VM (assuming the imaging program makes that possible), will the restored image work properly, without a lot of sophisticated tweaking?
I don't know the answer to that question, but I'm dubious that the answer is yes. If the answer is no, it would make multi-booting the clear choice vs. a VM in that situation, because using the VM approach would probably require reinstallation of the OS, drivers, programs, data files, settings, options, preferences, updates, etc., none of which is necessary when restoring an image to a multi-booted configuration. Also, I would expect that re-activation issues might arise for some software if it has to be installed into a VM after having previously been installed into a base OS, especially if it has previously been installed a significant number of times.
Do you have many programs nowadays that only run on XP?
Not many, but there are definitely occasions that occur from time to time when my wife and I need to open proprietary file types that were created in the past with programs that are now obsolete and won't run on Windows 7.
Although I understand that at least some versions of 7 have a compatibility mode which emulates earlier versions of Windows. I haven't tried that mode, but I would have my doubts about its effectiveness in all such situations.