I upgraded all of my eligible guests to VMtools 11.3.5. Only the Bug Sur 11.6 guests reverted to 1024x768 and stayed there. Monterey Beta, and Bug Sur 11.1 beta, and then all my older guests back to 10.11 upgraded fine. On a whim I enabled metal for the 11.6 gusts and then video was back to normal. So I guess the bright side is that Metal may be working again?!?
I presume you're on fusion 12?
Professional Version 12.1.2 (17964953)