Question: I am contemplating doing something barbaric.

A computer, with obsolete / discontinued software that requires a Windows XP 32 bit environment, lost it motherboard. As a short term fix a Windows 7 64 bit machine running a virtual machine of XP is running the software; but the software disconnects / crashes from the server several times a day. (The Win7 machine was an under used machine.)

What is the best way to extract the drivers from the Win7 machine for installation on the hard disk of the Windows XP machine? I assume that the Windows XP hard drive will need its license rearmed / reset. 

I've backed up business files and taken a mirror of the drive

Answer: 
I would try these steps:

1. Is there a native version which will run on win 7 - x64?  
Since you wrote *obsolete/ discontinued software* the answer is most probably no, but this would be the best solution as [XP will no longer be supported in a year](http://www.microsoft.com/en-gb/windows/endofsupport.aspx). (So you either need new software in 2014, or you will need to run it in a computer with its network and USB ports glued shut.
2. If you still have the installer, configure a full virtual PC and install the software. There are plenty of ways to do this, e.g. [Vmware player](http://www.vmware.com/products/player/), [virtual box](https://www.virtualbox.org/), ...
3. Run it in XP mode or the integrated sort-of-XP virtual machine. I think this is what you are doing and what is failing.
4. Run the original installation of the dead machine on new hardware.
5. Run the original installation of the dead machine on a vm (phys2virt conversion).

Steps 4 and 5 should be easy if you still could boot the old disk and run the [sysprep](http://www.microsoft.com/en-gb/download/details.aspx?id=11282) command found on XP prof. CDs. (That will clear hardware information and easy the installation on new hardware (Either real of 'vm-hardware')).
Just plug it in and see if it boots. That's the true barbaric way to do it.

Chances are though that xp just doesn't have drivers that support the hardware and you're completely hosed.