After quite some struggle, I got the mono::live CD to boot & actually work in Virtual PC. The first step to sucess is to create a new VPC image, and capture the ISO of mono::live for startup of your VPC image:
This thing will now ask you a couple of questions, such as country, keyboard layout, and screen resolution you would like to use:
Now for the stumbling block - mono::live (or Ubuntu, the underlying distribution, to be more precise) detects the graphics card emulated by VPC, however, uses the 24BPP mode with the VPC-emulated card only supporting 16BPP. Looks weird at first and had me stumped too. But I got help on GotMono.com (actual post, interesting snippet provided here for reference):
As far as I am aware, the easiest way to handle this is to just allow the machine to boot up all the way, and then when you can see the fuzzy background image (i.e., the stretched Mono logo) so that it looks like booting is complete, hit CTRL+ALT+F3 to bring up a command prompt.
Then type (or rather, cut and paste), this command, all on one line:
sudo sed 's/DefaultDepth\t24/DefaultDepth\t16/g' /etc/X11/xorg.conf > /tmp/xorg.conf && sudo cp /tmp/xorg.conf /etc/X11/xorg.conf && sudo killall Xorg
to restart the X server at a color depth Virtual PC can handle.
Because pasting didn't work the way I wanted it to, I ended up typing this stuff using US keyboard settings on a German keyboard (don't ask). Anyways: this did the trick! Now I can start exploring mono::live without having to reboot my machine.