Type 1 and Type 2 hypervisors have very little impact on the featureset of the VMM itself.
The only difference is that Type 1 hypervisors run on the metal itself and virtualize the host (or parent partition) as well as the guests. Type 2 hypervisors run as an application or service on the host, the host is not virtualized.
Type 1 tends to be centered towards production servers
Type 2 tends to be centered towards desktops, testing and development servers
The actual feature sets are very common between both and depend wholly on what virtualization solution you're using.
Here's a rough set of steps to get you started
1. Install your VMM of choice: KVM, Xen, VMWare Workstation, Hyper-V, etc... or a dedicated virtualization platform such as ESX Server (aka VSphere)
2. Download the installation CD for the guest that you want to create. All major operating systems can be virtualized to varying degrees. Feel free to ask me for details or suggestions.
3. Use the VMM's built in management console to create a new guest. This process is specific to each VMM. I use VMWare Workstation so I can't really help you with Xen.
4. The VMM will create and configure a new machine. Some VMMs have assisted installs which will automatically install the guest operating system provided it recognizes the installation ISO. VMMs which use paravirtualization will often require that you know ahead of time what OS family you're going to install for proper configuration. VMMs which use just x86 virtualization do not but may have difficulty.
You are a god-send! Thank you!
I will be trying step 1 tomorrow as I need to create some cd's tonite. For step 2, I was going to load Red Hat.
Red Hat is a commercial distribution. If you have a licence for it then that's fine but if not, you should use CentOS or Scientific Linux. They are both binary clones of RedHat, just lacking the proprietary material.
Ubuntu and other Debian derivatives also virtualize very nicely