Here are the steps to solve the problem:

1. Right click on the target virtual machine in the VMware console and select “Remove from Inventory.” This will remove the virtual machine from the Inventory list in the console without deleting the guest image.
2. In the VMware server console select File -> Open -> Browse to the folder that contains the relevant *.vmx virtual machine configuration file.
3. Select Ok. The problem virtual machine will now be listed VMware Server Console Inventory.
4. You should now be able to power on (start) the guest image.

Note: If your still experiencing the same error message, navigate to the folder that contains the VMware guest images configuration files and verify that the relevant user has full NTFS permission on the folder.

Part of the reason for the low performance is that SSL is enabled by default for console connections. By disabling SSL, I got much better performance, although still not to the level of VMware Fusion.

Here is how to do it:

1. Select Host -> Settings
2. In the dialog select the Connections tab
3. Uncheck “Use SSL for Console communications”
4. Click OK

Note: by disabling SSL, you are lowering security, so please consider the implications before using this tip.