Virtualization and Firewalls/Anti-Virus Software

Question.. if you have Fusion or Parallels .. do you need to install a firewall or virus software in Windows? The more I think about it, the more confused I get (nothing new there). Is XP inside OS X or running separately? If I do need to install them, I won't be using Windows enough to warrant paying for it; any advice on the best free options?

Also.. if I DID get a virus in Windows, does it carry over to Mac? I'm not so concerned about Windows; I just don't want to mess up OS X. That said, if the risk is there .. I'll install whatever I need to. I haven't installed Fusion yet, but I'm assuming I can drag files/folders between the two systems.

Thanks..

Yes suggest AVG or some other free antivirus program.

No it will not carry over. Without some protection it would necessitate a clean install of XP.