Alright,I downloaded x-Plane so I could test this idea. With version 7.5, which is still in beta (but VERY close to release), this works. First start x-Plane and configure it to pump NMEA data. Then connect your iFly to your computer via the serial port. (if you're connecting two female cables you'll need a null-modem adapter to do this). After a few seconds, voila, you're iFly is tracking your x-Plane flight.
Things to note: If x-Plane is not pumping NMEA data the iFly will treat the serial cable as an NMEA output, not an input, and it will start it's own pump. This is why you need to get x-Plane started first.
I assume this will work with MS as well, but I didn't test that.
Happy flying,
Walter
P.S.: ComputerDoc, with 7.5 you also have the option to disable the terrain flashing.