I had a rare moment of 'I can't believe that actually works' at work this week.
What I was doing was running the 64bit Windows 7 Beta on a vm hosted on a 32bit XP machine. So yes, running a 64bit operating system under a 32bit one does work (assuming you have a sufficiently recent processor). Several of my colleagues were rather surprised by this too. Kudos to vmware for implementing this.