have you used virtualization before? i am unfamiliar with "Microsoft virtual pc" software, but most virtualization sw's allow you to configure the specifics of the environment provided for the guest os. that is, you define a capsule in which the guest os (dsl in this case) lives. now to hand it the whole computer on a platter as a default would be weird.
in vmware server (free download) you are asked simple questions when a virtual machine is created. how much disk space, should it get its own ip on the network, etc. make sure that your virtual pc software is configured to allow it to connect to the network.
can you open a terminal in dsl and post the output of a couple commands?
ping -c 3 www.google.com
cat /etc/passwd (just kidding about this last one hehe)