Solution (Workaround)
For some reason when the VboxDRV.sys kernel driver gets loaded and started on boot something breaks. Now it may be my anti-virus hooking into it but I have not tested that. I did try disabling (not uninstalling) the AV with no difference. The solution I found was to delay the startup of VboxDRV service by setting its startup type to Demand. This way VboxDRV.sys will load but not start on system boot and will only start when it is needed. Conveniently, running VirtualBox will trigger VboxDRV service to start and by that time the boot process should be complete and everything works without any issues (opening VMs without the error above).
I found this fix works best if done in this order:
Completely uninstall any VirtualBox currently installed
Restart the computer
Install the latest version of VirtualBox
After install completes do not restart the computer
Open the registry editor. Start > Run > regedit
Go to: HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\services\VBoxDrv
Edit the key called Start. Change it's value from 1 to 3
Close the registry editor and restart your computer. After your computer restarts you should be able to use VirtualBox without any issues.
Upon restart you can confirm VBoxDrv did not start on boot by opening command prompt > type sc query vboxdrv > under STATE it should say STOPPED
Hope this helps someone. I know it's not a proper fix but it's the best one so far for people where reinstalling Windows or uninstalling their anti-virus is not an option.
All I did was go into the settings of each of my virtual boxes (ubuntu and xp), I disabled the Network adapter, then I was able to start the machines when network was disabled. I shut them down, then enabled network, and they magically started working. I'm running Virtual Box 3.2.8 r64453 on Win 7 as the host (sorry linux brothers and sisters) and I'm running Ubuntu 10.04, and Win XP virtuals. I think this happened because I just updated the Win 7 host, and it updated the RealTek gigabit network hardware. I also have my Ubuntu box setup to auto start when Win 7 boots...though I have yet to test if that still works. If I don't reply again, then it worked...I'll reboot right now. Cheers!
