You can legally activate Microsoft Office Home and Student on two PCs, one main licensed device and one "portable device", both under the use of one person in their home.
Source: Microsoft Software License Terms (MSLT) for Microsoft Office Home and Student 2007
There are no explicit restrictions on running the software in a VM on a host running the software, and it can be assumed legal to activate, given two PCs are allowed to be activated at any given time.
If you are required to call the 1-800 number, simply follow the directions. If the automated system asks you how many PCs have been installed with the license key, just say "0" (if you have uninstalled and are reinstalling) or "1" (if you are activating the second available license), and it will allow you proceed.