With the Virtual Machine properly shutdown, not suspended, from within the OS try removing and adding back the Sound device under Removable Devices on the target Virtual Machine's Settings sheet using the [+][-] buttons in the lower left corner of the Setting sheet. The close Fusion and relaunch it and run the target Virtual Machine.

By default normal file based Virtual Machines are created in the "~/Documents/Virtual Machines" folder.

~ Is your Home Folder

They are placed in a Folder (Bundle Package) with an extension of ".vmwarevm" which by default the extension is not visible in Finder.

Example: "~/Documents/Virtual Machines/Windows XP.vmwarevm" would in Finder just look like an icon named "Windows XP"

You can view the Package Contents of the "Windows XP.vmwarevm" folder by Ctrl-Click (or Right-Click the "Windows XP" icon and select Show Package Contents.

You would Ctrl-Click (or Right-Click) on the "Windows XP.vmx" file and select Open With > Other... then in Choose Application choose TextEdit.

Note: This should be done with the VM shutdown and closed and not suspended.

Also have a look at: A Beginner's Guide to VMware Fusion

Message was edited by: WoodyZ

Have you tried to look around the Device Manager in your Windows XP install? It might actually tell you if it sees audio devices but are improperly functioning.

Did you ever get a notification from Fusion UI stating "Sound will be disconnected" ?

Try this:
Close Fusion completely.
Then select the Sound Output device from System Preferences.
Start Fusion -> VM and let us know if the problem persists.

If this doesn't solve the problem, upload vmware.log and .vmx file for further analysis.

Thanks,
Bankim.

Try the Left Alt Key.