Basically XP/VS Server can also be installed on virtual machines.

However,  the license of XP/VS Server is bound to the MAC Address of the guest’s primary network interface à Further information you will find here: Licensing on virtual machines

But you have to take care if you choose a hoster who offers operating-system-level-virtualization technology, for example Parallels Inc. with its server virtualization solution “Virtuozzo”.

Virtuozzo is an operating system-level virtualization product designed for large-scale homogenous server environments and data centres.

But Virtuozzo blocks any foreign kernel-mode drivers from running in a VPS (Virtual Privat Server).

That is – from their point of view – necessary to prevent things like blue screens, because with operations system-level virtualization a blue-screen on one VPS would cause a blue screen on all other VPS as well.

XP/VS cannot be used without our kernel driver and therefore is not compatible with operating system-level virtualization like Virtuozzo.
To be sure you may try to install „Process Monitor" from Microsoft (you may download here) - it does not work either!

So you'll have to find another hoster that does not use operating system-level virtualization