m0n0wall works fine with most virtualization software like VMware Workstation, GSX, and ESX, and Microsoft Virtual PC and Virtual Server.
While these types of configurations work, we don't recommend running any production firewalls under any sort of virtualization. m0n0wall as a virtual machine is very well suited to testing and development environments. In fact much of the m0n0wall documentation is written by Chris Buechler using VMware Workstation teams with 10-15 virtual machines.
If you plan to use m0n0wall in VMware for testing purposes, we suggest using Chris Buechler's pre-configured m0n0wall VMware images.
For using m0n0wall in MS VPC or VS, you may want to check out the pre-configured m0n0wall images for Microsoft Virtual PC and Virtual Server for download from Chris Buechler's site, make by Chris Nottingham.