Windows Blog talks up Med-V
To ensure XP hold-ons make the jump to Windows 7 Microsoft have launched “Microsoft Enterprise Desktop Virtualisation” or “Med-V”. From a “very” high level this provides a virtual version of XP that can host legacy XP applications with a layer of central management on top. Whilst I prefer that this type of technology exists than not at all, it does seem a little over-engineered, unlike App-V which I love, but unfortunately non-Microsoft software vendors don’t understand (and therefore don’t support).
My beliefs is that Microsoft has offered the enterprise two solutions and if you can get your vendor to support you running on App-V I would take this route over and above Med-V (who knows maybe in this climate your legacy app vendor has gone under!)