It is possible to mix VMs and hardware, no real issues. Just make sure you pick the right size VM
If you were managing the WSA with SMA, the POLICY config is in the SMA, Security Services, Administration/etc. have to be done by getting a full XML from the box that is down or manually.
If you were running regular backups and getting them off box, you can just pull one of those, then remove/readd it to the SMA (the SSH key will have changed, so SMA will treat it as a new box even if using same IP/name.)