Install the Windows Phone SDK 7.1 (will say that 2 parts of the install have failed on mine, but didn't matter)
Install the Windows Phone SDK 7.1.1.
On other machines (and this is the nice part as I won't have to install Windows Phone SDK again if I ever re-install) you can simply copy the compatible vmm.sys and keep it safe - then on subsequent machines simply copy the vmm.sys over the existing one AND REBOOT (back it up first) and Virtual PC 2007 just works
