My understanding is that you don't want to use Time Machine with virtual machines because Time Machine is pretty dumb - it keeps an entire copy of the file. This is fine for small text documents, but you'll rapidly run out of space if you tried it with a virtual machine. Without knowing about how Time Machine works, I'd also guess that it only works when the file to be backed up is closed (otherwise you may have inconsistency problems).
To nitpick, VMware (not WMware) is a company, Fusion is one of our products; similar to how Apple is a company and the Macintosh is one of their products. Fusion 1.0 does not support Leopard as a host because Leopard wasn't finalized when Fusion 1.0 was released.
Time Machine provides the option to ignore specific folders. You might want to tell it to bypass your virtual machine folder that way.