Ijack :
The reason I say that a native install is always going to be better is not so much because of passthrough but because, inevitably, there will always be some resources - in particular memory - used by the host OS. So the ultimate performance is always going to come from a native install. But, for the OP's particular requirements, an install in any modern VM software should do the job (assuming that his CPU has the correct support and doesn't have to resort to emulation).
But Microsoft Virtual PC (which I assume is what he has tried) doesn't fall into the category of "modern VM software".
1. A native install is not necessarily better than a VM. Yes, the host OS needs some resources, but if you use a modern 4, 6, or 8 core processor the difference to bare metal is neglectible. Xen for example employs some scheduling mechanism that gives the guest what it needs, up to the maximum number of VCPUs you specify. I've run DVD ripping under Linux while converting several hundred RAW photos with lots of edits, denoising, etc. in Lightroom on the Windows VM and both tasks performed incredibly fast. My Windows guest gets 10 VCPUs, my Linux host 2 VCPUs (using a 6-core i7 3930K CPU). Since Windows/Lightroom wasn't able to utilize the CPU resources, about 50% of all CPU resources went to Linux and DVD ripping. This test was actually the only way I could really make my CPU "sweat".
The most important criteria for gamers is GPU power. Since Xen or KVM can provide VGA passthrough, you get a dedicated graphics card for the Windows guest using the vendors own graphics driver under Windows - no emulation!
Memory is cheap nowadays. I have 32GB RAM and gave 28GB to Windows and 4GB to Linux. Under Linux I run all /temp etc folders in memory. Actually 2G would have been sufficient for Linux, if it weren't for my using Audacity that can really take up lots of RAM. So, 2GB are fine for Linux, 4GB are plenty, and only if you run special software that uses lots of RAM you may want to give it more. As for Windows (7 or 8), 4GB are pretty baseline, more is better. For gaming 6-8GB should be enough, though. Performance-wise the Windows VM doesn't take a noticable hit on memory speed.
Disk I/O: I use LVM for both Linux and Windows. Yes, my Windows VM runs on a LVM volume. To me this is the greatest thing since sliced bread. I can easily backup my entire Windows VM into a compressed image file. The backup process for a 70GB Windows image takes 7 minutes, to restore it takes 5 minutes. Note that I backup the entire image, not the files. I keep several backups, including a "golden copy", to be on the save side. Restoring the Windows VM from a backup couldn't be easier.
LVM supports snapshots. So while you run your Windows VM, you can take a snapshot copy and back it up. If Windows crashes, you can restore that snapshot. Important: It's best to make a backup copy of Windows while it isn't running, so you have a good copy of the Windows installation and all software while Windows isn't actually booted. This copy should be kept in a save place, just in case.
I believe the OP was looking for such a snapshot feature.
As for disk speed, I am very happy with the speed I get in the Windows VM. I use a SDD for the Windows "C:\" volume, and striped LVM drives for data. I could also use RAID together with LVM, but striped drives give me similar performance to RAID0, and LVM is more flexible than RAID. You can see in the Passmark results that I posted that my disk performance for the Windows VM compare well with bare metal performance (it looks identical).
I've been dual-booting Windows/Linux before, but my current Xen setup beats dual-booting a thousand times. It's so much more convenient. I do actually use both Linux and Windows simultanously. For example my entire CD collection resides on a Linux ext4 drive and I play music while editing photos under Windows and Lightroom etc. Actually everything except photo editing is done under Linux, and I can switch between both in an instance.
To sum it up: Using the right virtualization technology (currently this is Xen and KVM - both free and open source - and maybe VMware for enough $$$) you can get bare-metal like performance in a VM, and you can passthrough one or two graphics cards to the Windows guest for a virtual high performance Windows gaming VM. You can also take snapshots of VMs, including running VMs, and easily restore them. Actually you could also clone the Windows VM at intervalls and just boot into a cloned snapshot should the current Windows VM or game crash.
2. "But, for the OP's particular requirements, an install in any modern VM software should do the job..."
This statement is incorrect. As far as I know, there has been progress with for example VirtualBox to include better hardware support. But to the best of my knowledge only Xen and KVM, maybe VMware (?) ,are able to deliver native graphics acceleration in a Windows VM. All of them employ the same technology originally introduced into Xen: VGA passthrough.
VGA passthrough is a special kind of PCI passthrough taking into account the specific requirements of graphics cards.
To make it simple: None of the other "modern VM software" will allow you to run Windows with the graphics driver of the graphics card you are using under Windows. As for the "3D acceleration" advertised by various VM software vendors, this so far doesn't match bare metal performance. It's mostly Windows Aero support, or some OpenGL or similar support. This kind of graphics acceleration may work for some games, but it won't work for modern high-end games.
Aside from Linux and Wine, which works for a limited but growing number of Windows games, the only viable solution to running Windows games in a VM is using Xen or KVM.