Well MSE won't update the definitions automatically when using Win7 Pro's XP Mode on a VM of that I'm sure. It does not update automatically and when you try to manually update from the GUI it stalls about 25% into the download reporting simply that the definition couldn't be updated.
I would post a pic of the message screen if my definitions weren't already up to date.
A year ago it was working fine both automatic update and if you manually enabled the update but sometime earlier this year, April, if I recall correctly, that stopped working. Since then I've had to manually update via a download from the MS web site.
I did think that this was probably just Windows XP left being further, unhelpfully, sidelined (which now seems proven to be the case) but I was told on another forum that it was actually the MSE automatic server support that had been stopped. I assumed that meant across the board not just for XP.
Further confusion occurred when I later tried to update MSE itself on the VM and it wouldn't install the newer version. I hadn't noticed the changelog indicated it now didn't support XP.
However none of this was a reason to suppose MS would stop the definitions for MSE being automatically or manually updated via the GUI whatever the OS being used. But, apparently, that is what MS may well have done.
I'd actually be interested to know if anyone using XP either in the same way on a VM or as the prime OS has had a different experience and MSE is still updating automatically.
Whatever the case, I'd still suggest an older version of AVAST would be a better bet as the primary AV if the current version is not to your taste or causes problems specifically with Win7.