I've done a bit of reading in trying to find a solution. It seems that the display driver is at fault. There are numerous other articles out there but it seems none have a clear answer and/or steps to rectify the problem at least that I've found. It is my hope that I can clearly outline what worked for us. We had to replace the display driver with the WDDM driver located here: C:\Program Files\Common Files\VMware\Drivers\wddm_video. A reboot is required so plan on doing this when the server can go down.
If you need a step by step guide here is one I just threw together for our documentation:
Prep:
1.) Make sure VMware Tools is up to date. Our version is 8.3.2 build-257589. We had to download the VMware Tools ISO from
http://packages.vmware.com/tools/esx/index.html (latest>Windows>x86_64 is what worked for us) to do a custom install where we specified that all the VMware device drivers were to be installed to the hard drive. (Reboot Required)
2.) The guest machine needs to be at VM Version 7. You can update the VM "hardware" version using update manager. (Reboot Required)
Changing Driver:
1.) On the 2008 Server open up the device manager and expand the Display adapters
2.) Right click on Standard VGA Graphics Adapter and select Properties
3.) Click the Driver tab.
4.) Click the Update Driver button
5.) Select Let me pick from a list of device drivers on my computer
6.) Click have Disk... button
7.) Click browse and go to C:\Program Files\Common Files\VMware\Drivers\wddm_video
8.) Select vm3d and click open.
9.) Click OK on the Install From Disk window
10.) VMware SVGA 3D (Microsoft Corporation - WDDM) should be selected
11.) Click Next and then Close
12.) A reboot is required so select Yes.
After the reboot it should work great.
Good Luck.
