I just found the coolest little download from Microsoft. A free download to mount ISO files as drive letters (think MAC here).
Virtual CD-ROM Control Panel for Windows XP
Now THIS needs to be included in Vista, if it is not already. As the source of where I found it said, it's a little bit of a manual process and it's UnSupproted by MS (use at your own risk). It's got an ugly interface, but for Vista it should be a built-in right-click.
But we all know how slow VirtualPC is to install an OS from a CDROM. Using this tool I was able to load up W2K3 Server very quickly.
Tip: When running the virtual PC, make sure to go to CD -> Use Physical Drive Z to enable the ISO to boot from.
Very very nice...
Thanks to pleloup for finding this.