Can you please share the host details?

Is the VM set to run Windows 11 or some other OS?

How were these VM's created?  Was it done with the instructions in the unofficial guide?  If not, that could be the issue (all the other instructions have issues).

More importantly, I had major issues upgrading Fusion 13 VM's - huge video artifacts and problems.  Rebuilding VM's from scratch solved them.  I'd suggest doing that, and follow the instructions in the unofficial guide (especially on how to get the latest and greatest ISO - do not use the VHDX, or uuddump instructions - they will get you either builds that expire, or outdated builds).

@Woodyanna Can you share the Windows version which is installed in the VM, you can get the same by typing Winver in the search box next to Windows icon and hit Enter, you will be able to see the Windows version.

The version is Windows 11 Home, 22H2 (OS Build 22621.192). I built it last fall using the instructions in the testing guide and registered it with a Microsoft license key. It has been working well and updating itself regularly since then. Yes, VMware Fusion is configured for a Windows 11 VM. The version of VMware Fusion I was using before trying the preview is Player Version 13.0.2 (21581413). Install Virtual Tools is grayed out in that version as well, but I thought that was probably because the virtual tools didn't work the same way in that version. If there are other settings from that version that would help, let me know. Thanks for trying to help!

There are no tools in V13, only in the TP.  

I've had issues upgrading tools from v13 to the TP (video corruption and other problems).  I'd suggest building a new VM from scratch using the instructions in the unofficial guide to get the ISO.  The VHDX is an insider build that will expire, and uuddump doesn't build the current ISOs on a mac.

I'm seeing some flakiness in upgrading a Windows 11 ARM VM that was working under Fusion 13 as well. I find that after upgrading the VM's hardware version and adding the updated tools, the Microsoft Store starts giving me trouble when trying to search for upgrades of "purchases" I've installed in the VM.  This doesn't happen on a freshly installed VM in the TP.

Not sure if you are using an Apple Silicon device, if so try this:

Step 1: Click the Windows Start menu and type PowerShell in the search box. Click Run as Administrator, and click Yes on the User Access Control prompt. (If you don’t see Run as Administrator, right click on PowerShell and select Run as Administrator).

Step 2: Type the following inside the PowerShell prompt:

Set-ExecutionPolicy RemoteSigned
Press Return on your keyboard to execute the command, and then type ‘Y’ and press Return to confirm the change to the execution policy. Type Exit and press Return to close the PowerShell.

Step 3: In the menu bar click Virtual Machine → Reinstall VMware Tools and click the Install button on the prompt that appears.

Step 4: Open Windows Explorer, navigate to the DVD drive, and ensure that VMware Tools setup is mounted. You should see a Setup.ps1 PowerShell script in the root of the DVD drive.

Step 5: Right click on the Setup PowerShell Script and click Run with PowerShell. Click Yes on the User Account Control pop-up.

VMware Tools will now install, along with the necessary VMXNet3 network drivers and SVGA display driver. After a short countdown, the PowerShell window will automatically close.

Network functionality should now be operational, and you will also be able to configure display settings via Start → Settings → Display. There should be no need to restart in order to enable this functionality.

@CallistoJag If the OP is running the Tech Preview, you do not use PowerShell to install the VMware Tools provided in the release. Those instructions are only valid for the released Fusion 13 product.

The Tools ISO in the Tech Preview contains a proper setup.exe file that is used to install the tools. 

Thanks so much to everyone who has tried to help! I am using an M2 MacBook Air, and I tried CallistoJag's first two steps, planning to then use setup.exe to install the tools. However, the Install VMWare Tools option is still grayed out. Since my virtual machine has been working fine and updating correctly since last fall and I have quite a few apps installed, I am very reluctant to start over. I'm also not sure how hard it would be to move my Microsoft license from one VM to another.

Those steps don't apply to the tech preview - they were for Fusion 13.

Two questions:  Have you applied all windows updates to the guest, and second, what is the guest OS type set to in settings/general for the VM itself?

Yes, the guest is up-to-date; I installed an update a few days ago and just checked again. In Settings/General, the OS is set to Windows 11 64-bit Arm.

All the menu does is select the appropriate ISO image for the Tools installation, and mount it to the VM's CD-ROM drive.  Have you tried doing that step manually?

@Woodyanna If possible can you please share the exact downloadable link from where you got the Windows 11 ARM iso which you used for Windows 11 VM creation.

I created an ISO by following steps mentioned in this link- https://www.makeuseof.com/download-install-windows-11-arm-iso/.

On my Macbook Pro M2 with Ventura 13.4.1 host, I was able to create Windows 11 23H2 Home Insider Preview VM and "Install VMware Tools" was enabled in Virtual Machine menu and I was able to proceed ahead and install VMTools.

No. How would I go about doing that?

It's a little convoluted because of the way VMware has packaged its app on macOS and how Apple defines application bundles. 

• Open a Finder window and navigate to the Applications folder.
• Right click on VMWare Fusion Tech Preview, then select "Show Package Contents"
• A window will open with the contents of the Fusion application bundle. You will see a folder marked "Contents"
• Expand or open the Contents folder. You will find a Library folder in there.
• Expand or open the Library folder, You will find a folder named "isoimages" 
• Expand or open the isoimages folder. You will find a folder named 'arm64"
• Expand or open the arm64 folder. There you'll find a file named "windows.iso".
• Drag the "windows.iso" file to your desktop. It should create a shortcut/alias on your desktop.

Now go to Fusion.

• Configure the CD/DVD drive (Virtual Machine  > CD/DVD (SATA) > Choose Disk or Disk Image...) for your Windows 11 VM to point to the windows.iso file on your desktop.
• Start your Windows 11 VM. The tools installer ISO should now be mounted to your VM (and AutoPlay may ask you what you want to do with the mounted CD).

@Woodyanna I tried searching Windows 11 ARM ISO from Microsoft Site but it's having version Windows 11 Home Insider Preview, so just wanted to check with you if you can share the site from where you downloaded the ISO with Windows 11 Home version 22H2

Last fall, I used instructions in the unofficial VMWare guide to go to UUPDump and install Windows 11 Home Edition 64-bit for ARM processors. I bought a license from Microsoft to register that version and have been doing normal Windows updates ever since.

To clarify further, I used a standard Windows build, not an insider one, and I haven't joined the Windows Insider program since. I didn't want to have to worry about expirations or running a beta OS.