Cheng has a post on using Distributed File System with System Center Virtual Machine Manager found here.  I have been running SCVMM with DFS-exposed libraries since Beta 2 of SCVMM 2007.  He has taken all of the guess work out of how to do it and has essentially documented everything I had to figure out.  If you have a virtualization infrastructure in multiple sites then you should definitely take a look at this article.