Actually, running a VM is maybe a good solution to avoid collision with other parts of the installed software. As you know, a VM is like a dedicated computer with nothing else installed on it. Another benefit is to use it on your newish computer which is faster (of course VM will steal some performance but I've noticed no problems with VIDA level software which is not a very demanding software)
VM also adds a little more clunkiness on UI having to swing between 2 windowing/operating systems and deal with assigning the mouse+USB inputs between the 2 operating systems. But its not too bad really. Once inside VIDA, one is staying there to work for awhile.
My setup is a 2008ish Macbook Pro (not fast by today's standards) with VirtualBox Windows XP VM. I run both VIDA DICE and Toyota Techstream (for our Prius) on the VM with no problems. I actually just leave the VM always up and running so its like having my car diagnostic computer available all the time.
This said, VM does require a little more computer skills for setup. Probably about the same skill level to solve interference with other software installs. For someone with less computer skills, it seems a dedicate computer running Win XP is probably the easiest fool proof path.
Here is what I would do: Get VMWare Player (Free http://www.vmware.com/products/player/), which is a virtual machine software. VMWare Player does not allow you to create new virtual machines, just open previously made ones.
Next, find a Windows XP Professional VMWare image. This is more than just an install disk - this is a full already installed image of XP Professional SP3.
Open the XP image with VMWare Player, boot XP in your virtual machine, and install VIDA on that. You need to connect the USB DICE through to the Virtual Machine, see the help/tutorial to learn a little about VMWare player.
The huge advantage of this method is everything dealing with VIDA is completely isolated into that virtual machine. Thus you don't need to worry about what else you have installed that will mess up vida, viruses hidden in any of the SW you've acquired, etc. The only thing you are installing on your main PC is VMWare Player, which is very trustworthy.
You can even enter full-screen mode, which will make it seem like you are running the real XP.
The whole process should be very painless & simple, the only thing you are missing right now is a VMWare Image of XP Professional. If you want you can try installing XP from the installation disk you already have using VMWare Player, which requires a bit more work, see e.g.:http://johnbokma.com/mexit/2005/10/26/vmware-player-windows-xp.html .
-Colin
PS: VMWare Workstation (basically full version of player) is excellent SW, I've used it for many years now in a variety of environments. So I would have no hesitation using the player edition, but I honestly haven't tested the above with VMWare Player only. The Microsoft VM that comes with Windows 7 is a joke by comparison.
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