For one of my work projects, I needed to edit the hosts file on my Parallels Windows XP VM (which I use to test IE 7 compatibility). I ended up creating a shortcut to it, and thought others might find it valuable.
- Right-click on the Desktop
- Click New -› Shortcut
- Type: %SystemRoot%\system32\notepad.exe %SystemRoot%\system32\drivers\etc\hosts
- Click Next
- Type: edit hosts file
- Click Finish

I have a shortcut that does exactly that. Mine is actually on one of the Explorer toolbars though (quick launch or something).