I'm running PE2 on Windows 7 Professional using Windows Virtual PC and Windows XP Mode. Seems to run just fine.
Note that you do need at least the Pro version. Windows 7 Home Premium won't work, according to Microsoft. It's a $90 upgrade to Pro from Home Premium. See
http://www.microsoft.com/windows/windows-7/get/anytime-upgrade/home-premium.aspx for more information.
Also note, I do believe you need to install PE2 *after* you have installed Virtual PC, XP Mode and XP Mode update, and do so while *running* in XP mode.