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This issue has been addressed in Workstation 7. I'm afraid that there is no workaround for Workstation 6.5.3.
When you tried running the application under VMware Workstation, did you try changing the preferred execution mode to VT-x (or to VT-x/EPT if you have a Core i7/Core i5/Core i3)? That might improve your performance.
Thank you for your response. I tried changing the preferred execution mode to VT-x. I am running a Intel Core 2 Extreme and it didn't make any difference.
I have since upgraded to VMWare Workstation 7. Just doing that the VM Image runs significantly faster. But the best part is that I can use XP Mode and VMWare at the same time.