VMware has decided to retire VMI support:
Their thinking behind this is that CPU virtualization technologies are overtaking any potential performance benefits from paravirtualised guests. (This announcement doesn’t refer to the paravirtualised drivers they have been introducing.)
VMI will be phased out of Workstation first; beginning in 2010; followed by vSphere in 2011.
Obviously they feel the effort in maintaining this capability isn’t worth it. I get the impression that VMware introduced VMI primarily to compete with Xen. I don’t think that VMware was ever that convinced that it was a good way to virtualize VMs.