While working in the first VM I made (macOS 10.12), I realized that 40 GB is not enough for the work I'm doing. I cloned the Snapshot I wanted to continue working out of and set it to 80 GB. It's set correctly in the Settings, however there is a mismatch in sizing. External reports "85.9 GB", but it only thinks the hard drive size is 42.09 GB. I've shut down the VM, closed out of VMWare Fusion and re-opened, with no changes. I checked with a couple coworkers who use this program and they were also not sure what the problem is.
Whenever I tried to resize the partition, it only allows me to adjust the 'Macintosh HD' portion slightly but does not allow me to utilize all the free space. So I can allocate as much hard drive space as I want (I even cloned the same VM and allotted it 160 GB; Macintosh HD still only has 42 GB available to save anything to), but there's still an issue with free space.
Right, so I tried to reproduce your scenario to see if I bump into any unexpected difficulties.
First I cloned a 10.12 OS X VM using the full clone option.
Then resized the disk from 40GB to 84GB and at the end you get this screen.
With that tip in my mind, I booted the VM, started Disk Utility and as you say, you can resize the partition to something smaller, but not larger.
But it is because the user interface is confusing.
With Virtual Disk selected you have this screen:
Now instead of trying to increase the disk size by dragging a the little orb, click into "free space" on the left.
Your screen will change into:
Then click the "-" button.
and that's it. Click Apply to confirm.
It will popup a dialog to ask you if you want to remove partition "Free Space" just confirm and there you go, after it does some work you get the bigger partition that you wanted.