I know nothing about virtual pc other than that , as far as I can see, it is a little like Classic, and similarly slow and not a great addition to a mac... This is all totally unfounded and possibly untrue
Dmg files should be downloaded usinfg Safari, although Opera works fine as does firefox I gather.
Internet explorer will often not download them correctly and try to open them as excell documents or anything else it chooses
I imagine you can switch virtual pc off ... but exe files will, I imagine try to open it again.
Whether viruses can effect vitrual pc ... I have no idea ... but it seems possible.
I hope that my comment about dmg files will help at least.
OSX10.3.9 G3