and SSH won't let display graphical applications like that
Just like you "ssh -X you@<vm host> firefox" and run your VMWare Server console w/in firefox, you can "ssh -X you@<vm client> <any app that works in X>".
... which causes the least network overhead would require testing. The old VMWare Server-1 interface was prohibitively slow even on a LAN. Then again, if you must have the complete X session (not just an X-based app) running on the client, the VNC (TightVNC) on the client w/ Chicken-of-the-VNC idea on the MAC front-end works too.
If all you need is a TTY, why even use SSH? Why not use a serial connection which would be even lower overhead.
The issue was network latency. Ssh or a serial console over a cyclades-like console server when working over the internet (a mile away, or on the other side of the planet) has much better latency characteristics than any GUI (including an Avocent-like remote KVM). GUI latency, even VNC, just isn't as productive (read "maddening and frustrating") as an SSH command-line session when working remotely.
Then again, if you must work with a GUI, then hopefully you can be on the same LAN and not need remote access and latency will be less of a productivity issue.
But, we digress. The Chicken-of-the-VNC idea works great when you have to export your VM clients GUI (i.e. a Windows client or an X-based app) to a Mac, and Safari provides access to all the VMWare Server-2 switches except the console.
