From VMware:
"A bug in the Mac OS X 10.5-10.5.1 operating systems caused the system to fail if Time Machine attempted to back up live virtual machines. To avoid this, VMware Fusion 1.1 excluded all virtual machines from Time Machine backups. Apple resolved the Time Machine bug in Mac OS X 10.5.2, so VMware Fusion 1.1.2 now allows Time Machine backups of virtual machines if the Mac is running Mac OS X 10.5.2 or higher. This may result in larger Time Machine backups. If the backups are now too large, you can manually exclude your virtual machines from Time Machine backup and copy them separately to your backup disk."
Now here's my question, does Time Machine back up the whole file if it sees it's changed or just the changes? Example, let's say you have a 40 GB VM. While you're using it, that 40 GB file (if you chose to allocate all space at creation, which gives best performance) is changing it's date/time stamp. So does that mean if you use your VM all day and Time Machine is backing up all day, that you'll have multiple 40 GB ADDITIONAL files added to your backup? This will fill up a backup disk pretty fast. Not sure if this is the case or not, I have to test it. Wondering if anyone has though...