>Another type of "virtualization" people talk about is Windows' remapping of certain folders and registry entries in a user's profile. However, files stored on a network share are not subject to this.

In the case where the program stores its datafiles in its home directory, and the program is installed in "Program Files", I would guess that you'd likely run afoul of weirdness from directory virtualization when you run the program directly on the host computer. Likewise, in the case where you're using remote desktop into the host computer, that you're probably going to run into the same situation as running directly at the host computer (since with remote desktop you are in effect running on the host). What I'm not sure what will happen is in the case where you set up the program folder in question as a network share. Would the host system enforce directory virtualization in this case? Or would enforcement be subject to configuration of the client? Would there be any difference if you running in a domain or peer-to-peer type environment?
We've been in general avoiding the issue by instructing the users to *not* to install the program under folder such as "Program Files"