vmware or similar virtual image

I would, however, take exception to virtualizing your monitoring server...
call me crazy or old-school, but it always seemed wrong to me.

IMHO this is depends on the robustness of your virtualization solution.

We're moving onto a large scale VMWare cluster with EMC and HP/3Par
storage backends. I'm not at all worried about the xymon server
(currently running on a G4 which is one of the smallest and oldest
boxes in the shop)