I cleared out the vmware.log and then did a clean boot (successfully). Once Windows XP Home SP3 loaded, went to "Start -> Shutdown -> Reboot" and then the Fusion froze on the bios screen (see Picture 2.png) during the bootup.

Also attached my vmx file. Please let me know if I can provide any further information to help resolve this issue.

This can happen if you are and the guest is not using a multiprocessor HAL (so disables the second virtual processor). The problem is that Windows does such a good job disabling it that we can't bring it back on guest reboot. The solution is to use the correct HAL for your setup.

Thanks worked for me.

What is the easiest way to update the HAL in Windows XP Sp3?