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I installed XP mode from this location:
Now I would like to install some linux distro on that virtual machine, but I don't see an option for that. All I can do is to set up new windows xp.
Any suggestion would be appreciated.

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XP mode is just a free distribution of Windows XP for any installation of Virtual PC running on Windows 7. If you want to run a Linux distribution just install it on Virtual PC. Virtual PC is installed when you install XP Mode, but you may need to install the stand alone Virtual PC if you want to add another VM.

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When I click 'Create virtual machine' I see no option for creating 'empty' virtual machine. I had that option in VM2007, but I can't have both versions installed on Windows 7. – šljaker Jul 26 '10 at 9:03
When you go to Start > All Programs > Windows Virtual PC > Windows Virtual PC a folder will open up. That folder will contain your XP Mode VM. The menu bar of that folder will have the option for Create virtual machine. Select that option to create a new (Linux or other) virtual machine. The machine you create will be "empty" as you said. Just follow the instructions after you press the Create virtual machine button. Installing the stand alone version of Virtual PC is not required after all, this can all be done with the XP Mode version of Virtual PC. – ubiquibacon Jul 26 '10 at 9:14
Thank you! It worked. – šljaker Jul 26 '10 at 9:22

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