I'm using Fusion 1.1.2 and it seemed that Time Machine was indeed backing up my Windows Vista Virtual Machine file. However, I had a problem with my iMac and had to have the power supply replaced by Apple. As a part of that debugging process, I had wiped out my disk drive. When the iMac came back from Apple, I used Time Machines full restore operation to retrieve my entire environment and data from my backup. All seemed to restore perfectly. But when I tried to run my Vista Virtual Machine, it said it could not run due to missing file (I believe it was the VMDK file, but I forgot to write it down). Upon inspection, it seems the size of my Vista Virtual Machine file that had been restored was only about 5GB in size, and I knew that my original file was about 24 GB. Fortunately, I had been manually copying my VM file as well every now and then and was able to restore back from that backup rather than use the one Time Machine restored, so I'm up and running with no real loss of anything. But it makes me doubt the reliability of the Time Machine backup of the VM file in the future. Does anyone have any light to shed on what I might be doing wrong or expecting? I thought this version of Fusion had enabled things so that Time Machine would do reliable backups of the VM files.
