I'm thinking about creating a separate virtual machine that will be used for software development only. The isolation should work very well in order to reduce clutter and separate development software from personal programs, games, and other things. Also, this should reduce the risk in case of virus infection, OS reinstallation, etc.
Now, what would be the best operating system for software development? This assumes development using Microsoft tools and technologies - Visual Studio, SQL Server, SharePoint, web, etc. Lately I've noticed that people use Server operating systems to set up development environments. In a way this makes sense because all the services could be run locally.
Since it appears to offer an interesting experience and Windows Server 2008 is the latest OS published, I will go for it. It does make more sense to do web development on Server OS rather than Workstation OS like Vista or XP.
As for the Sharepoint, I still have not decided whether to have a separate virtual machine for Sharepoint Server or to install the Sharepoint services on the development machine. The case for keeping these two environments separate is already listed above but the issue is that it takes two virtual machines running to do Sharepoint development. So, there has to be a compromise between functionality, performance, and similarity to the real-world environments. What is the best relationship among these?