QEMU
Qemu is a free x86 Emulator/Virtual Machine for Linux and Windows. If you are looking for something faster, you can try the Qemu Accelerator Module (documentation here) or VMware.
Grabbing debug messages
By default, ReactOS debug messages are sent to the serial port (COM1). For grabbing that output, you need Qemu version 0.6.1 or later, in which you can specify the -serial option.
Like this:
$ qemu -serial stdio -cdrom roslive.iso -boot d
Tested on Windows XP and Vista with qemu 0.9.0:
C:\qemu>qemu -L . -hda C:\qemu\ReactOS.vmdk -cdrom C:\RosBE\Source\Reactos.iso -serial file:con
Be sure to use the paths valid depending on your configuration an program paths.
Valid arguments to -serial include filename and pipes so other valid configurations include for example:
-serial file:"C:\roslog.txt" -serial pipe:"\\pipe1\
ReactOS preloaded with QEMU
A preloaded QEMU image of ReactOS can be found here.
