I would be careful disabling that service. Someone may correct me if I'm wrong, but I believe disabling the VMware Snapshot Provider service will prevent VSS from running when a snapshot is made. This essentially the same as setting disk.enableUUID to false. As a result, quiescing will be disabled and you will not have an application-consistient backup of the VM.
I know in vSphere 4.1 there was an issue where this service was not installed correctly when VMware Tools was installed. The fix was to uninstall the service by modifying the VMware Tools install and then reinstalling it. I never could get that to work and ended up back on the fix I wrote about on my blog.
I tried disabling the service and running a backup job on a VM that I had not done the freeze script fix on and it does indeed let the job run and complete with no errors, but the Windows event logs don't show any VSS activity. I added the freeze script and now it does.
Whichever method you use, a freeze script that kicks off VSS will be necessary to get an application-consistent backup. If that is not a requirement, then LMHSysAdmins' fix will save a bunch of time, as well as a VM reboot and allow a file-system consistient backup.