Yes it can. DOSBox can see the real file system, according to the directory that you mounted (so if you mount c: as c:\, then something running inside DOSBox can access all of your files). Also, DOSBox provides no isolation, and there are known out-of-bounds access bugs that could potentially allow the execution of arbitrary code in some circumstances.

DOSBox does not provide a secure execution environment.

Your host isn't safe in any VM enviornment. It's just safer.

Great answers, thanks guys. That was my assumption, but the way you explained it, makes perfect sense. I should have recognized that since it has access to the underlying file system, that the host OS was not immune. I should have caught that.

This is why you should never mount your entire hard drive. If you only mount a folder then anything running in DOSBox will generally only have access to that folder, at least while it is running in DOSBox

I am not sure how to mount only a single folder on a drive in Windows. I know that if you run as a Limited User, the system files cannot be accessed without elevated privileges. But to mount only a single (or a couple) folder(s)/directories, I am unaware how to accomplish that. I know that can be done in Linux, but I have never heard of it in Windows.

http://www.dosbox.com/DOSBoxManual.html#MOUNT

I see, you were referring to a specific DosBox feature, as opposed to an OS config.

Excellent, so then (in theory), by limiting access to one specific folder, you would increase your security because any nefarious activity would not escape from that single folder. That would make it very similar to a VM, except for maybe access to system memory issues.

It is a convience feature, not a security feature. I wouldn't depend on it if I were you.

I realize the poster's question is about the security of DOSBox, but it also differs from most VM software as it emulates the hardware rather than using "virtualization" that provides more direct access to the hardware. I do wish someone could provide a virtualized CPU core, I have a few pieces of software I'd like to see run /w beefier CPUs, but don't run under the current virtualization platforms.