With the release candidate build of service pack 1 for Windows Server 2008 R2 you can now enabled Dynamic Memory on the standard and web editions of Windows Server.  However – there is a slightly different process to do this on the various versions of Windows server:

  • Windows Server 2003 / Windows Server 2003 R2
    • All you need to do for these operating systems is to update the integration services.
  • Windows Server 2008
    • Here you need to first have service pack 2 installed.  Then you need to install this hotfix: http://support.microsoft.com/kb/2230887 inside the virtual machine.  Finally you will need to update the integration services.
  • Windows Server 2008 R2
    • Instead of updating the integration services – you need to install the release candidate of service pack 1 inside the virtual machine.

Cheers,
Ben

http://blogs.msdn.com/b/virtual_pc_guy/archive/2010/10/28/enabling-dynamic-memory-on-windows-server-standard-and-web-editions.aspx