Stu over at vInternals posted an article a couple of days ago about a problem he encountered with VMware vSphere and Windows Server 2008. Apparently, there is an unexpected behavior with Windows Server 2008 and VM hardware version 7 that is described in this VMware KB article. Stu, however, was seeing the behavior not on upgrading VMs from VM hardware version 4 to VM hardware version 7, but on new virtual machines created from the beginning with VM hardware version 7.
According to an update on Stu’s article, VMware has acknowledged this as a bug and will be investigating a fix to the problem. Until then, follow Stu’s advice and speak to your VMware account team if you are experiencing this problem. If you are getting ready to proceed with a VMware vSphere upgrade and have Windows Server 2008 Enterprise Edition VMs in place, keep this behavior in mind and plan accordingly.
Thanks to Stu for bringing this matter to light!
UPDATE: Stu posted an update with more information and an explanation for the unexpected behavior, so be sure to check it out.