First of all my PC config:

Host:Windows 7(32-bit)

Guest: Windows XP SP3 as XP Mode.

Integration Features Disabled(I don't think it has any thing to do with networking).

Network Connections on Host :

1.Local Area Connection(Realtek...) - unplugged(as no other PC is connected).

2.Nokia 2730 classic USB Modem - I use this connect to the internet.

Now,How can I connect the guest to the host as if they were on a LAN. Please give specific steps as I am using Windows XP Mode/Virtual machine for the first time.

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In the VM network setup, you need to make sure the connection is setup as a Bridge. This will allow the VM's network connection to go through the hosts connection and act as if it is on the network.

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With Virtual PC (What XP Mode is running on top of) it does not use the term Bridged it actually lists the network adapter's name – Scott Chamberlain Apr 13 at 5:03
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