Can I (and if so how) setup SC 7 and SC 8 on the same server? I do all my dev work in a VM and I need access to both at various times of the day. It would really make my life easier on my laptop if I could have them as different IIS apps on the same VM. Is it just a matter of changing the host/app/etc settings in SIM when I do the install? Any ideas?
You can have multiple versions of Sitecore on a single server.
Firstly, just install them into different folders and have them pointed to different Databases.
And secondly either have them both sit on their own domains so they can both run simultaenously, or if they need to sit on the same domain, then switch in IIS between the two. I'd recommend having them sit on different domains, this way you don't have to change any configurations when you want to switch between the two.
I love Sitecore because of its architecture. Everything related to Sitecore is in your instance's directory, so there are no other dependencies/dlls gets copied in windows/system etc.
so you can run multiple versions side by side. as mentioned by Jarmo, keep you host entry/domain different, Instance name so the database names.