If I had to hazard a guess, I would say the networking from the Server 2003 system is not configured correctly -- possibly its DNS is not set up properly, which might explain why it can't resolve another machine. If you haven't yet run NETDIAG and DCDIAG on the virtual domain controller, do those and see what results they turn up.
Another thing to be aware of is a caveat I dug up regarding the use of undo disks on virtualized domain controllers:
"Do you have undo disks enabled on either this guest or the domain controller? This is likely the cause of your problem and is why I asked you to provide the exact error message. A domain member has a computer account in the domain, which, much like a user account, has a password to protect the account. This password is changed periodically (the period depends on the OS). You have to be very careful using undo disks because of this periodic password change. What has happened here is likely some variation of the following:
- Both the member server and the domain controller are running.
- The member server changes its computer account password.
- The change is noted on both the member server and the domain controller.
- The member server is shut down, and changes to the undo disk are discarded.
- The member server now has the old password, while the domain controller has the new one.
- The member server is booted up, attempts to setup a secure channel with the domain controller and can't since the passwords don't match.
To prevent this from happening you need to not use undo disks, or understand that this is a potential problem when using undo disks, or search the Microsoft Web site for DisablePasswordChange and/or RefusePasswordChange and modify the registry as appropriate."
This was first published in January 2007