Im using my DC as the time source which is point to an external time source...is that still best practice?
I have all Windows VM's.
correct. Windows Time service is set to automatic and started by default and the guest tools sync is not.
we use windows time in all our VM's and do not sync the guest tools with ESX. You should pick on or the other, but not both
So by default, does installing vmware tools only sync with Windows and not ESX unless you check the box off to do so?
correct. Windows Time service is set to automatic and started by default and the guest tools sync is not.