I prefer a VPC or VMWare image. You can install and configure an environment you prefer (like the one described at http://weblogs.asp.net/erobillard/archive/2007/02/23/build-a-sharepoint-development-machine.aspx), make a snapshot of that environment, start your project and alter your environment. When you finalize a Project, just put your snapshot back and you just created your new clean image. With SharePoint 2010 I will be starting the same way,… Maybe there will be a better way while when we have more experience with 2010, but that’s for later…

I have always used VMs for developing against SharePoint. With the new requirement of x64 bit guest OS your best bet will either be Hyper-V or VMWare running Windows Server 2008 x64. As a rule, I always put 2GB against my dev VM. With 4GB on a laptop it is doable, but it may be time to upgrade to an 8GB laptop so that I can run more than 1 VM at a time.

Hi T parker, You are correct but your default os from your laptop has to be 64 bit as well else your default os will only see the 3,5 gb of ram... keep that in mind. best thing would be a laptop with 16 gb of ram like the new dell laptops...