Looks like it shouldn't be a problem.
I wouldn't recommend it because of code overhead, but it should work perfectly fine (of course, no sql joins over the two databases etc). You'll need to activate the mssql extension, of which I'm not sure wether it's installed by default with XAMPP.

why can't you convert to mssql completly?

There's two reasons I can't convert it:

First its quite a sizeable database (12GB) and it gets downloaded and completely overwritten every morning (the database is updated daily).

We need it to go live on the site as quickly as possible - and every attempt I've made to convert it to MySQL (using freely available scripts) has taken most of the day - therefore it takes too long to convert it :(

Secondly, the database has got 50 tables in it, most of which need to be joined together in one huge join to get the relevant info needed on most pages (and to filter out all the records that we don't need).

Even with everthing indexed, its still quite demanding. I was therefore thinking that MS SQL views would be appropriate (I believe that MS SQL views can effectively be cached, while MS SQL continually has to re-create the view each time its called - though I could be wrong).

Well, going from mssql to mysql might be difficult, but why would you want to involve mysql at all if you will have a mssql db and fuel your site with that data?

- the site was orginally built in PHP/MySQL and will still be using lots of the existing MySQL tables.

Well, php does support MS SQL, just give it a try and see how easy it'll integrate into your existing code.