How to convince management to deploy to Virtual Machines
Okay, you've gotten really great answers here, but I'll illuminate why I love VMware & it's brethren.
Utilization - in a room full of servers, of which maybe a dozen are doing anything near 50% utilization, I can instead consolidate those servers onto one or two single larger servers and have room to growth.
Capacity planning - becomes less of a concern as you can buy with resources to grow, and $5000 worth of a server gives you lots of flexibility in deploying new services
Real-estate - I'm running a 200 machine test lab on three ESX servers (2xquad core). That's 197 servers that aren't sucking 1-300 watts of power sitting idle 90% of the time, and wasting disk, memory and CPU.
Flexible deployment - I need 15 Windows servers for a new project. With tools like lab manager, I can have this in an instant.
Simplified upgrades - I want to test an upgrade to a product. I can simply clone the entire machine, put it on it's own network, and run an upgrade test without impacting the existing service.
Backup - I can take snapshots of the entire machine's running state. No more need for special backup clients that can't lock files. (not entirely true for application state, however).
Mananagement - I can remote manage every single on the machines from one unified tool.
Cost-center/utilization billing - there are tools coming on the market now where you can bill by utilization, and help tailor your budgets to ensure groups aren't spending more than their fair share.
Disaster recovery - if your big ESX server crashes, it CAN transition the workload to a backup server designated to recover for it. Sometimes without the VM even knowing it crashed.
It sounds like you need some numbers to back-up your claims.
Virtualization does add overhead, but if the application performance isn't impacted by the overhead then the overhead is irrelevant. If you can put together numbers on application performance in a proposed virtualized environment then you'll be able to refute the "virtualization uses resources" argument.
If you can can show some reasonable hard dollar figures showing decreased expenses for electricity, hardware maintenance contracts, capital investment in server computers, and labor expense to perform hands-on maintenance on server computer hardware I think you can bolster your case.
Don't forget about the cost of licensing the virtualization environment and labor expense associated with maintaining it.
You could, conceivably, do all that work and find out that the numbers don't make sense. Be ready for that, if it happens.