Comment Generic Barebone plus Virtualization (Score 1) 142
You can get a decent generic barebone from Tigerdirect for less than $300 (have to watch for a deal) with a quad-core processor, 8GB of RAM and a TB hard drive. I have one with Xenserver free version because I like the tools and driver support. I have used VMWare 2 GSX and ESX, then ESX3, VMWare Server free version and ESXi, but have been using Xenserver free version in both test and production for the last three years, though I understand that VMWare's solutions are also very workable. A UPS is helpful as well.
My current test Xenserver has at time of this writing 4 VMs on it - two Linux boxes, a Windows server 2003 and an XP instance, all used for testing and development. I have a Windows 7 instance as well, but it happens to be turned off at the moment. I use an external USB storing snapshots of test VMs - get a clean config, store a snapshot of it, then you can test, muck it up, blow it away then start up a copy of the snapshot without having to re-install. Mine has been running continuously since early summer.
This setup can get you started with minimum cost and effort if you are doing development and functional testing that does not include anything too exotic like clustering or a database with a large transaction volume. You're not going to break any speed records but you can build VMs in all the OS types you want to test and limit the number currently running to 4 or 5, and you'll do just fine.