I just upgraded from 1.1 to 1.1.1 and the upgrade went incredibly smoothly, and if anything the program seems snappier than before. In fact, all I did was suspend my virtual machine (XP 32), run the upgrade installation, and restart the suspended virtual machine. It works great.
I'm using a USB microphone/headset to dictate this message (DNS into VM), and the audio system works fine.
Thank you VMware team!