1.1 Is this for you?

If you are thinking of setting up one or two small virtual servers, then Virtfs is probably not for you: whilst using Sendmail's virtual email support (and the such), you should be fine. However, if you will be setting up many virtual servers (ie. an ISP setting up a virtual server for each of their clients), you may want to use Virtfs. That is, if your clients want a dedicated filesystem. For example, they would like a system with their own passwd file (so they can add/remove users themselves), or when they log in to their virtual server, no other client has access to their filesystem - as all virtual servers are hidden from one another. Each server can have different users and groups from one another.

However, if you are thinking of running a few virtual servers which do not require special customization, and will handle a few users, you may want to look at the Pocket ISP based on RedHat Linux HOWTO (written by Anton Chuvakin).