I already run NAV 2011 in my Windows 7 machine. Do I need to install it on the virtual XP machine too?
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Yep you will need to install it on your virtual machine as you won't get protection from the windows 7 A/V instance.
Hope this helps

MatthewJ
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FWIW if you download the win 8 release preview, it comes with msft forefront security integrated into the iso, thus alleviating the need of installing an additional anti-virus program. http://windows.microsoft.com/en-US/windows-8/iso/ – MatthewJ Jul 30 '12 at 18:14