Some info on XP Mode, Virtualization, and my own experiences with it so far.
XP Virtualization mode is simply a refined version of Microsoft's own "Virtual PC". For those people that are still only using Vista, you can use the latest version of Virtual PC (2007) to get much of the same functionality of XP Mode. I believe this will also work with Windows 7 Home Premium, but I can't confirm that personally. With Virtual PC, You loose integration features and USB support, but it still works reasonably well. Also, it'll be a little more difficult to set-up since you won't be able to download a "pre-compiled" virtual machine. You will will have to set-up the virtual machine yourself, and have your old XP Install disks handy.
You can run games in "XP Mode" as long as it does not require 3D Hardware acceleration. To date, I've run Arcanum, Kohan, and Baldur's Gate II in either XP Mode or Virtual PC 2007. They didn't always play perfectly (Arcanum ran a little slow, Kohan had some minor screen flickering), but they were very playable. Speed is the biggest problem with any sort of virtual machine - since you're effectively running a computer inside of a computer.
I wonder if C&C Generals might suffer the same problem that I had with Neverwinter Night 2. With the Windows7 RC-7100 build, there was a small bug in the new DirectX tool that prevented some games from detecting the computer's 3d hardware. This bug is resolved in later builds of Windows 7, so there's a good chance that the few games that didn't run in Windows 7 RC will work just fine on the RTM version.