I recently setup a Windows XP Pro virtual machine w/Virtual PC 2008. So... I'm the only user account on the host - Administrator - and life should be grand.
While working on a specific project for a client, I copied to my VM C: drive a copy of the solution from a network share at the client site.
After some work - a couple days later - I needed to overwrite the local virtual machine copy with a refresh from the client site.
I continued to get the Access Denied when trying to replace files.
Okay... No biggy - I'm administrator - so I elect to DELETE the folder locally - I get the same error.
So... I open Windows Explorer (Start-->Run-->Explorer [Enter]) and browse to that folder. I select the folder - Right-Click-->Properties, and to my surprise, there is no Security tab. Mmmm Gotta love these mysteries.
By default, with Windows XP Pro SP2/SP3 - the Security tab is turned off.
To turn this on - open Windows Explorer, select Tools-->Options- you should see a screen like the following:
Click on the VIEW tab here...
Scroll all the way down and uncheck the Use Simple... blah blah blah
Hope that helps...