Your host antivirus will not scan things that are happening in the virtualization unless the virtualization is accessing files on the host hard drive (as opposed to inside a VHD, the way it normally works.)
However, unless you are surfing the web with a web browser that is being emulated in Windows XP or running an Email client that is being emulated in Windows XP, it is extremely unlikely that your virtualization will come in contact with a virus before the host.
So unless you are surfing or email from the virtualization, I would only worry about protecting your host operating system. You're going to use twice as much system resources protecting both your host and your virtualization.
Wow. What an interesting question. I would have never thought of this. – Josh Hunt – 2010-04-21T13:27:38.113
This is a great question; +1 – Marko Carter – 2010-04-21T13:58:03.873
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@joshhunt, oddly you have the accepted answer on this very similar(possible dupe?) question http://superuser.com/questions/10709/does-the-virtual-pc-xp-mode-need-safety-measures
– heavyd – 2010-04-21T14:11:30.293@heavyd: Wow. That's a bit embarrassing. hah. I guess it's a bit hard to remember one of my 355 answers from nearly a year ago. – Josh Hunt – 2010-04-23T15:15:24.823