Mac – Why can’t I copy-and-paste from the VM

Copy/Paste support is provided by the Virtual Machine Additions. Maybe you could try re-installing these?

This might help (from Recording in a virtual machine/microphone) :

Found a setting in the .vmc where I changed from false to true:

<sound>
  <sound_adapter>
    <enable type="boolean">true</enable>
  </sound_adapter>
</sound>

I don't get the built in microphone to work (why??), but the microphone in my MS web-cam works.

The above solution should be tried both with Integration Features enabled/disabled. Some people had luck with completely uninstalling and reinstalling them and rebooting,

The only way of really getting around the virtual hardware in the VM that I am aware of, is the use of USB devices which should transparently work as designed within the VM.

If you are thinking about giving up on Virtual PC, then I suggest VirtualBox, which is both free and excellent quality.