I have to admit I was a bit shocked when I tried to copy and paste text between VMs using Virtual Server. The clipboard was not copied at all and there was no easy way to transfer text back and forth. I tried installing the Virtual PC Additions and still no luck. I could not believe they left out a feature like this one out - I don't know if enabling this is trivial using some super secret setting, but until then, here is a workaround.
It is actually quite simple, and it was
Stephen who hinted me on this while I was ranting. On the host machine, enable Remote Desktop Connections and connect using a RDC client. You will be connecting to the VM just like any other mahine, and RDC supports copying and pasting of text back and forth.
Not the best solution, I know, but it gets the job done. It is also worth noting that the same problem happens with VMWare's VM player.