http://assemblergames.com/l/threads/xbox-alpha-xdk-reverse-engineering-and-virtualization.48094/ Found this.
I'd assume it would be hard to run the nonexistent XBE that would be required to run on the host Alpha PC to create the image. Perhaps you could create an image using standard WIN2K installed on an original Alpha II for the perfect hardware emulation, then have the VM host boot from CD and run restore in the VM session. I'll try this using an Alpha kit with another hard drive installed, do a bare install of Win2K so I can run VMWare Converter client on it and then just attempt the restore using VMPlayer on another box.
Ive tried runnig the recovery in various vm before, and that was before I got my hardware complete. And I remember error messages saying the videocard and parts of the motherboard incorrect or something. Basicly you either make the VM imitate the hardware or patch the software to allow to continue. Xqemu might be a great start because you have a videocard that atleast works with the xbox, all the rest is Petium anyway. maybe ill do some tinkering with vm's and these recoveries, but probably not soon. I have the alpha parts stored in a box awaiting a nice case.