I've been using VMware in production for two years now. During that time, I've been thrilled with it. I run my mail server and my web server on my host OS without any problems. About 2 months ago, I upgraded the hardware on my server from a recycled desktop PC to a dual core box.
Since I the machine now had two physical CPU's, I figured I would set my VM's to have two processors in the VMware config. I figured this way, each VM could use both CPU's as needed, and they could do there work faster, and there would be less latency when say IIS is starting up a new worker process, or the CLR is JIT'ing my blog.
Did I notice a speed improvement, very hard to say. I did notice that things like browsing around in Windows Explorer seemed very very laggy.
So I decided to make a maintenance window this afternoon and shutdown both VM's, and set there processor count back to 1 and see if that made a difference. Boy did it ever! Now the host CPU is mostly idle, the GUI on my web server is much more responsive, life is good.
I'm speculating that the reason the performance got a lot better when I switched the VM's to one CPU on a dual core machine has a lot to do with how VMware handles multiprocessor machines, and moving the tasks between CPU's, and the CPU's L1 and L2 cache, and cache hits. But thats just wild speculation :)