Windows Server 2016: How to Enable Nested Virtualization

YES, you can run LINUX within the nested Hyper-V instance!

Requirements and limitations at the time of this post:

• VMs must be running Windows Server 2016 or Windows 10 Anniversary Update. 
• VMs must be running versions 8.0 or above.
• The host processors must support Intel VT/AMD-V and Intel XD/AMS NX.  To confirm your server meets these requirements, run "systeminfo" BEFORE installing the Hyper-V roll

1. Create the VM which will run the Hyper-V Role.  For testing, I used Server 2016 Standard Edition with Desktop Experience.  See requirements above.

2. Confirm the newly created VM is powered off and run the following command on the physical Hyper-V host to enable the Virtualization Extensions on the VM:

Set-VMProcessor -VMName <VMName> -ExposeVirtualizationExtensions $true

3. Power on the VM and enable the Hyper-V role by running the following commandlet:

Install-WindowsFeature -Name Hyper-V -ComputerName <computer_name> -IncludeManagementTools -Restart

4. Confirm that the role has been installed successfully by running the get-windowsfeature command.

5. Networking must now be setup.  There are two options:
     A. MAC Address Spoofing
     B. Network Address Translation (NAT)

For testing, I chose to go the MAC spoofing route.  Run the following command on the physical host:

Get-VMNetworkAdapter -VMName <VMName> | Set-VMNetworkAdapter -MacAddressSpoofing On

6. From within the Hyper-V VM, create a new Virtual Switch:

7. This particular VM was only configured with a single vNic,  Confirm that "Allow management OS to share this network adapter" is checked.

8. Create a new VM within the nested Hyper-V instance.  For testing I like to use the TinyCore version of Tiny Core Linux.   Create it using Generation 1 hardware, the Virtual Switch created above and select the "Install an OS from bootable CD/DVD-Rom".

http://www.tinycorelinux.net/downloads.html

TCL can be found in .ova format in the following thread:
https://communities.vmware.com/docs/DOC-21621

It takes very little resources and has a basic graphical interface.   Here, I confirmed networking has been configured properly by pinging the gateway of the local LAN:

Enjoy your new found testing options!