Deciding how to configure a VM

Lets say I have a Physical Server that has 1 dual core CPU with 4gb or RAM and a 146gb Mirrored drive, running windows 2008r2 and I want to make it a VM running on Hyper-V.

I would configure it this way:
I would look at the disk space used and then add some to spare (say 10 to 20 gb) and make my new VM drive that size and make it STATIC. You can always make it bigger or add another drive later.
I would keep the RAM the same size, but you could reduce it to 2gb if not too heavily used.
I would keep the vCPU the same.

Things to do to optimize my new VM.
I would delete the temp files and then defrag the HD
Set my swap file size to twice that of the RAM
I would then defrag the swap file, there is a tool from sysinternals that will allow to defrag a swap file

http://technet.microsoft.com/en-us/sysinternals/bb545046

I would stop any unwanted or unused items for loading in startup or services.

Lastly if it is an older machine that has has lot of programs installed and uninstalled, I would clean the registry and compact it, then defrag it as well.

Very last I would re-run HD defrag again just to make sure it is defragged as best as it can be.

However before I did any of the above I would make a copy of the server VHD file just in case you mess something up.