So I have heard that one should never install software on a windows virtual machine via an RDC session, that you should always use the console when installing software. Is there any validity to that statement?
A little. I wouldn't install something like a NIC driver over RDC, in case it brings down my network connection to the machine, but I can't think of any other good reason.
+1 to Matt's comments.
Unless the software has to be specifically installed at the console then there is no reason not to use RDP/RDC. I have only seen 1 such software, and it was an in-house developed app.
If you use the DRAC on Dell or Remote lights Out on HP you can do the nic stuff as you can still console in. We had a fellow in our state network that imaged 100 servers remotely through Remote Lights out I always install via rdp-the drac makes it act like you're at the console if you're really that concerned. Who uses a physical monitor or KVM nolwadays? A lot of my work is done sitting in front of the TV set in my robe at night.