WinXPe and Virtual PC 2004

I would like to streamline my development of the Operating System. I'm
still working on making a much smaller image than I'm currently able to do.
Would it be possible to create the image on VP2004 and then remove it's
drivers and install that of my Target machine later? How would I go about
loading WinXPe on the Virtual PC image, if I can't create a share folder in
DOS to copy the files over? Anyone do development in this way (trying to
reduce the amount of reboots and dismantling my machine (as I have to insert
the iDOC chip and then move to target machine for FBA and then test image
size. Then start the process over again when I find out that the image is
still too large.