WE PROPOSE A DETAILED STUDY OF THE {IT VIRTUAL TELESCOPE FOR X-RAY OBSERVATIONS (VTXO)} DESIGNED TO ACHIEVE 10'S OF MILLI-ARCSECOND (MAS) IMAGING OF ASTROPHYSICAL SOURCES IN THE SOFT X-RAY BAND POTENTIALLY A FACTOR OF 50 IMPROVEMENT OF THE ANGULAR RESOLUTION OF ASTRONOMICAL OBSERVATIONS IN THIS ENERGY RANGE. THE 10 MAS-SCALE IMAGING IS ACHIEVED USING PHASE FRESNEL LENSES (PFLS) THAT HAVE BEEN SHOWN TO ACHIEVE NEAR DIFFRACTION-LIMITED ANGULAR RESOLUTION WITH HIGH EFFICIENCY AT X-RAY WAVELENGTHS IN LABORATORY TESTS. DUE TO THE LONG FOCAL LENGTHS OF PFLS VTXO REQUIRES PRECISE FORMATION-FLYING OF TWO SMALLSATS A 6U OPTICSSAT THAT WILL HOUSE THE PFL OPTICS AND A 27U DETECTORSAT THAT HOSTS A FINELY PIXELATED X-RAY CAMERA FORMING A VIRTUAL X-RAY TELESCOPE WITH A FOCAL LENGTH WITHIN THE RANGE OF 0.5 TO 10 KM. WE HAVE DEFINED A BASELINE FOR THE X-RAY IMAGING ANGULAR RESOLUTION AND SENSITIVITY FOR VTXO DERIVED FROM PFLS WE HAVE SUCCESSFULLY DEVELOPED AT NASA/GSFC. WE HAVE PERFORMED INITIAL STUDIES THAT DEMONSTRATE ELLIPTICAL ORBITS SUCH AS GEOSYNCHRONOUS TRANSFER ORBIT (GTO) CAN SUPPORT FORMATION FLYING IN THE NEEDED INERTIAL FRAME FOR SEVERAL HOURS PER ORBIT AROUND APOGEE WITH ONLY A MODEST DELTA V REQUIREMENT ON THE PROPULSION NEEDED TO HOLD THE FORMATION. VTXO IS A PATHFINDER MISSION TO DEMONSTRATE THE FINE IMAGING OF PFLS IN A VIRTUAL TELESCOPE BY MEASURING THE ENVIRONMENTS CLOSER TO THE CENTRAL ENGINES IN BRIGHT XRAY SOURCES INCLUDING STUDYING THE EFFECTS OF DUST SCATTERING HALOS NEARER TO THE CENTRAL OBJECTS IN CYGNUS X-3 AND GX 5-1 POTENTIALLY RESOLVING STRUCTURE IN THE BE STAR GAMMA CASSIOPEIAE AND POTENTIALLY STUDYING THE EFFECTS OF SPACE WEATHER ON EXOPLANETS. VTXO SUCCESSFUL ACHIEVEMENTS WILL FORM THE FOUNDATION OF LARGER MORE CAPABLE MISSIONS WITH MILLI-ARCSECOND OR BETTER ANGULAR RESOLUTION AND LARGE X-RAY COLLECTING POWER SUCH AS THAT PROPOSED IN THE MILLI-ARC-SECOND STRUCTURE IMAGER (MASSIM) MISSION.