You cannot drag a file from one virtual machine to another virtual machine in Virtual PC 2004 (833147)

RESOLUTION

To resolve this issue, make sure that Virtual Machine Additions is installed on all the relevant virtual machines, drag the file (or folder) from one virtual machine to the host operating system desktop, and then drag the file (or folder) from the host operating system desktop to another virtual machine.

Install Virtual Machine Additions

Note The following procedure assumes that both virtual machines are currently running.

1. In the first virtual machine, click Action on the menu bar, and then click Install or Update Virtual Machine Additions.
2. Click Continue.
3. Click Next.
4. Click Finish.
5. Click Yes when you are prompted to restart the virtual machine.
6. Repeat steps 1 through 5 to install Virtual Machine Additions on a second virtual machine.
   
   Note After both virtual machines have successfully restarted, the drag-and-drop functionality is enabled from one virtual machine to another virtual machine through the host operating system.