Alternatives for using a VPN in Windows XP Mode
Microsoft Loopback Adapter and Other Choices
My setup is a Windows 7 Professional laptop with one ethernet port and a Windows XP Mode virtual machine (Virtual PC). I had the XP Mode networking set up with one port ~ the laptop's ethernet port. Both Windows 7 and XP Mode were set up for DHCP (obtain an IP address automatically).
While that worked well when I used a separate VPN gateway device (Netgear FVS338), XP Mode could not see the remote network when I created a software VPN tunnel using the Netgear VPN client software on Windows 7. Microsoft says that in order to share the software VPN connection you have to create a Microsoft Loopback Adapter.
The problem arose for me when I was mobile, utilizing my Verizon Broadband modem (first the 3G version, later the 4G LTE Pantech UML290 version). I would connect to the internet using the broadband port, and thus had to use the software VPN client. Researching the issue, it looked like creating the Loopback Adapter would allow me to share the VPN connection over the broadband port.
There are a number of blogs that explain how to create the Loopback Adapter. I followed the instructions, then added the Loopback Adapter as the second networking port in the Virtual PC settings. A new ethernet port appeared in XP Mode. I then turned on Internet Connection Sharing on the Windows 7 side for the broadband adapter.
The first time I connected my broadband connection and started the VPN tunnel, all was good! Both Windows 7 and XP Mode could see the remote network. It worked fine for a while, setting up the VPN networking appropriately regardless of whether I used the VPN gateway or VPN software client.
Then one day XP mode couldn't see the remote network using the VPN software client. I went through all sorts of hoops of deleting, removing, cleaning, and reinstalling, and never got it to work again. Worse, my broadband connection started sporadically reporting a SIM failure, even though the Pantech worked on a different laptop. Even the solutions for fixing the phantom SIM failure did not solve the problem.
Eventually Verizon replaced the Pantech for me, and magically, the software VPN started working again for XP mode! For a few weeks. Then it just stopped working again. This time, none of the previously attempted fixes would bring back the VPN networking.
The eventual solution? I bought a Cradlepoint CTR35 router from 3gstore.com and installed the VPN client in XP mode. I plugged my Pantech into the gateway, started software VPN connections in both Windows 7 and XP Mode, and both were able to connect just fine. I've never had a problem since.
Well, mostly never. Occasionally the DHCP lease needs to be reset in XP Mode because it is stuck on an old configuration. "ipconfig /release" then "ipconfig renew" in a command window does the trick.
The Cradlepoint router is a small external router into which you plug your 3G or 4G USB router. It connects to the broadband network, then you can connect your computers to it wirelessly or using an ethernet cable.