I just downloaded the ubuntu-7.10-desktop-i386.iso file and created a new Fusion VM and installed it without any issues.
I did not install VMware Tools yet and from what I read in the documentation you need to disable IPv6 and then install Tools from the tar installer. Will have to do that tonight as I don't have time at the moment to do it.
BTW I'm using VMware Fusion 1.1.0 Build: 61385 which is Release Candidate 1 so you might want to upgrade to that version and try again.
Message was edited by: WoodyZ
Okay I installed VMware Tools and all appears to be okay however I'd suggest looking at http://communities.vmware.com/thread/109560?tstart=0 before installing Tools.