I am not sure what I did but luckily this is a test machine!
I installed SLES 10 64bit and VMware server 1.0.1
The machine is an Intel dg965ry with a core 2 duo 1.8ghz, 1-80gb sata, 1-250gb sata and 2gb ram @533mhz. I installed linux and the vm server on the 80gb drive and put the guests on the 250gb drive. I gave each guest 75gb and 1 gb of ram.
One guest is server 2003 32bit and the other is server 2003 r2 x64. I installed them fine and updated each, configured them and everything seamed fine. But I discovered that kernel-default was running removed that and installed kernel smp. After a reboot I had to reconfigure vmware for the kernel in order for the vmware services to load. It seams after that the vm guest's were never the same.
I can start one guest and it will run fine and fast. As soon as I start the other guest, it doesn't matter which order, the server will come to a crawl. After a while they will both load and I can log in but if I do anything that requires work the system slows to a crawl again. And it is getting worse. Now I can't even load both guests at the same time. The system is completely unresponsive. The hard drive light is on solid though.
I have reinstalled linux and vmware server then opened the guests and it still is slow. So I am not sure what else to try except for blowing away the guests and starting over completely. But I would like to get them working because in a production environment that is really not the best option.