My device, which is a Linux based IP in-liner is transparent to the network peripherals, that is, no IP address assigned to any of its interfaces.

For the sake of the conversation, let's use ADSL connection as an example, while the device is inspecting the bi-directional traffic, the network is behaving same as if device was not there, attached to the wire (see Physical setup at the attached diagram).

I wonder if I can enclosed that "device" within a Windows machine and have it operated virtually so it still seats inline between the ADSL router and the Windows netwroking interface by using virtual NICs, (or whatever their name is in windows), and inspecting the traffic, same as if it was on a separate physical device, the drawing under "Virtual Setup" in the attached diagram show what I am trying to achieve.

Reading a bit on the VirtualBox docs, seems like binding the right side is relatively simple, perhaps I should have one network adapter set as Bridge Networking and VirtualBox will connect it to the physical NIC on the host machine, and network packets are exchanged directly, circumventing the host operating system's network stack (WinXP in my case).

However, I have no idea how to achieve the left side of my diagram, which requires adding virtual NICs to windows and configure them correctly in a way to make that pipeline possible.

I would appreciate any help.

by the way, if that is not possible with VirtualBox but with other virtualization solution (e.g. VMWare), I would accept the other as well.