OK. Thanks for the VM. I could reproduce the problem.
Here's what's happening: The VM is created on a very old version of player or workstation, and it's official virtualHW version is 7. This causes the X server driver dispatcher to enable the old legacy driver that is not at all compatible with vmware fbdev. Still Ubuntu has forced fbdev on for 12.04, and there is a clash. By coincidence it happens with this upgrade, but it could have happened much earlier.
Remedy: 1: Update the VMs view of the virtual hardware:
0. BE SURE TO BACKUP YOUR VM, BE IT USING SNAPSHOTS OR A COPY
1a, For Workstation 9 or above owners, just run "Upgrade this VM"
1b (Completely unsupported and unrecommended) For player players: Get a recent vmware player, Change the .vmx file line virtualHW.version = "7" to "9" and fire up the VM. Verify that everything seems to work before proceeding.
Remedy 2: Disable vmwgfx fbdev in ubuntu.
0. BE SURE TO BACKUP YOUR VM, BE IT USING SNAPSHOTS OR A COPY
1. Edit the VM file /etc/modprobe.d/vmwgfx-fbdev.conf to say
options vmwgfx enable_fbdev=0
2. Run
sudo update-initramfs -u
3. Reboot
Eventually we might release a patched xf86-video-vmware that enables the newer modesetting driver whenever fbdev thinks the hardware version is new enough...
Thanks,
Thomas
