If I understand correctly, you are running a windows 2003 server as a virtual machine.
This is basicly the same setup as any other setup.
The lsclient needs to connect to the service, the service connects to the sql server.
Lsclient connects to the IP address of the server or to the hostname.
A known misconfiguration for this setup is that the windows firewall is ok on the virtual machine, but not on the hardware machine.