I found the source of the problem !!!
Yes. The Logitech "SetPoint" Software running remotely on the Master PC connecting the Logitech Marathon M705 (and probably other similar mouses) triggers the bug within the VMware. Scrolling speed with the scroll wheel on that Logitech mouse is significantly faster in the Windows XP Pro guest than on host.
The best way to fix this is to dissable logitech's "SetPoint" software from loading on boot. You may delete the relevant registry entries to achieve this.
The pay off is that I lost the ability to assign functions on the mouse keys on the host but I am sure you can do it using another program . All the buttons can remain functionable even without the logitech program running, but they all function by their default setting but like said you may do it using another program.