Virtual PC / XP Mode Error outs with Required configuration: - Windows must be configured in mode 800x600 minimum - Windows must be configured in mode 'true colors'.

Hello,

I am running Application using XP mode and Virtual PC on Windows 7. I have 8 GB RAM and more than 300 GB free disk space. When I launch application in XP, I receive following error 

Required configuration: 

My screen resolution is  1024× 768

and I do not see any other options to resolve this problem.

Any guidance is greatly appreciated.

Ganesh