With the release of the RTM version of the Windows Phone 7 developer tools, some folks are running into the video card requirements that block them from running XNA applications in the emulator. I hit this problem on my home machine too, and the solution was this video card for $20 after rebate: http://www.newegg.com/Product/Product.aspx?Item=N82E16814121360
The specific error is "The current display adapter does not meet the emulator requirements to run XNA Framework applications". Video cards must support DX10 and WDM1.1, as detailed in the Release Notes for the SDK.
Note that my video card requirements are simple: I don't game on my PC, I use it for small development projects and web browsing. If you have more advanced needs then you will probably need a higher end video card. YMMV.
Caveat: this card is NOT an official Microsoft recommendation, just my personal one.