I just finished my 3rd Academic quarter with 3 of my production servers running as virtual machines. I setup VMWare in the fall and went into production just before classes started fall quarter.
My setup includes (2) Dell 2950's with (2) each Dual Core 3.73 ghz cpu, 16 GB RAM, dual fiber cards, 4 gig nics, and dual power supplies. These 2 servers are directly connected to a Network Appliance 3050c Cluster SAN. (the direct connection, without a fiber switch, was a little tricky to setup but works well as long as I don't ad any more Servers). I setup VMWare ESX 3.0 on both servers and hooked them together with VMotion.
VMotion is sweet. Had a switch go out that was connected to my ESX Server 1 and VMotion auto moved all running servers to ESX Server 2 within seconds. If I hadn't got the email about it from VMotion I would of never known as the systems all stayed in production.