In the intrests of science I have continued to 'attack this problem'.
1st issue 'RAW partition one' :
The Release Notes for Vista specify that you can't install Vista on a "RAW" or unpartitioned and unformatted hard drive. That's exactly the kind of drive that VirtualPC creates when you set up a new OS. Fortunately, the release notes have a work around.
Setup in this release of "Longhorn" versions of Windows does not support installing to "RAW" disks (disks without a partition). To work around this issue, install the "Longhorn" version of Windows on a partitioned disk. If you must install to a RAW disk, press SHIFT+F10 to open a command prompt. Use the Diskpart utility to create a disk partition. Restart the computer after creating the partition, and start Setup again. The disk should be available for use.
2nd Issue - Graphics stuck at 4 bits:
Simply install 'Additions' if you have the comatible card running underneath the all will be fine. My first attemp seemed doomed by a dodgey graphics card!
3trd Issue - Performance:
Give it more memory - running with my VPC set to 1 Gig on a 2 Gig machine then performance is better.
Overall : I like Vista but I miss some of the early Longhorn goodies. Lets wait and see how it progresses. By the way “I really like the new IE" - I know some in the 'blog' world hate it but I like it particularly the tabs. It was a bit of a shock at first that the File, Edit .... menu was no longer at the top but it is all very logical and I adapted quickly to it - I now have it on my XP partition as well!!