Hi Virtually Yours,
Remember that we are not trying to run the server we are just trying to simulate that the server has failed. A simple high end user machine with some added hard drives will do from a hardware standpoint. For the licenses; that I would not worry about as the server is never going to have any users connect to it. It will just be used in test to verify your backup and restore process. Also you can make it an all in one box DC/GC/E2k3 server ... this does have some limitations but saves you having to have another piece of hardware to do the test.
You can use virtualization in order to do this test. Virtual Server or PC would work fine along with any of the other virtualization software that is out there. What is comes down to from a Microsoft stand point is that we have not tested Exchange running in virtualization so we will not support it in production. We will do everything we can to help you get it working but if we believe for any reason that your issues is being caused by it running in a virtual server we will require you to install in on stand alone hardware in order to precede.
Hopefully this has addressed your questions.
-Matthew Byrd