Looks like the some of the tool files are missing.
First make sure you take a backup or create a snapshot of the current state.
Now, tell me, what is the status of the "VMware tools" when you go to the Fusion Menu Bar-Virtual Machine
If it still says, "Install VMware tools" that means the tools have not been installed properly.
1. Go to Services.msc and see if VMware Tools is running, I assume it's not. See if you could restart it.
2. If this doesn't resolve your issue, then you need to delete VMware tools manually.
3 Uninstall VMware tools from control panel.
4. Delete VMware tools folders from below locations on the VM(mind, you might have to really focus with mouse because Mouse would behave waywardly.
C:/Program Files, ProgramData, AppData/Local/Roaming.
5. Restart the VM.
6. Install VM tools.
This should resolve your issue.
It worked. But I had to go through all the steps, including manually deleting the VMware folders.
Many thanks for the help!