I went hunting through the options in the Virtual PC UI but didn’t find anything related to disabling this option. A bit of googling later and I’ve got it disabled by adding a few lines of XML to the .vmc file.

First, make sure your VM is shut down and Virtual PC is closed.

Then find your .vmc file and open it in a text editor such as Notepad.  By default, Virtual PC creates .vmc files in My Documents\My Virtual Machines.

Find the </microsoft> tag and insert the following lines directly above it:

<components>
<host_time_sync>
<enabled type="boolean">false</enabled>
</host_time_sync>
</components>

For example:

Disabling the host time synchoption option in a .vmc file

Then Open Virtual PC, start your VM and you’re all done!

This was tested on Windows Vista 6.0.6001, SP1 using Microsoft Virtual PC 2007 (6.0.156.0)