Yes. Very well.
Yes it will since it is VT (Virtualization Technology) enabled but since you will be using MS 2008 Hyper-V, ensure the following options in the BIOS are ENABLED, in case they are not, change them and set them to enable.
Intel Virtualization Technology
Intel Execute Disable Bit
Are you installing "Microsoft Hyper-V" that comes as a separate distro from Microsoft with basic Virtualization Console or are you installing either of the following:
Microsoft Windows Server 2008 Standard Ed
Microsoft Windows Server 2008 Enterprise Ed
Microsoft Windows Server 2008 Datacenter
In either case, your processor E5420 is VT enabled and support EM64T (64-bit) but you should always ensure this as either of the OSs above require a 64-bit platform. Let us know in case you encounter any problems and we'd be glad to help.
Intel Go Green, Save The Environment!