Installing Windows 7 on VMware Server 2.0.1
VMware Server does not yet support Windows 7, but that doesn't mean you have to wait for a new release. When creating a new virtual machine, pick either Windows Vista 32 bit or Windows Vista 64 bit instead. Downloading the ISO file from MSDN Subscriber Download, placing this file in one of the data stores and mounting the image into the virtual CD drive is the easiest way to get the setup running.
Windows starts the installation right after powering on the virtual machine. The remaining steps are pretty self-explanatory. When you are prompted to enter a key, you can skip this step. It's easier to enter the key later in Windows 7 when you have access to the MSDN Key list and simply can copy and paste the key.
After Windows 7 started, the first change should be to disable the mouse pointer shadow in Start > Control Panel > Mouse.
The next step is usually to install VMware tools. At least with Windows 7 in the 64 bit version clicking on the link in VI Web Access to activate the VMware Tools image only results in an error message: The operating system is not supported. You can activate the image manually, though. On the server that hosts VMware Server open C:\Program Files (x86)\VMware\VMware Server and copy the Windows.iso file into your data store. Then use VI Web Access to mount this ISO image.
Inside Windows 7 open the CD drive and run Setup64.EXE. Following the steps and rebooting the system enables VMware tools with the known benefits such as having better mouse support.