I've been girding my primary machine for the Snow Leopard to Mountain Lion conversion for about a year. Yes, before ML was released.
Have I mentioned that I hate OS updates?
The good news is that I'm starting to like Mountain Lion on my MacBook Air. I like it enough I'm even considering replacing my main machine's problematic Magic Mouse with a Magic Pad after the conversion. So now I'm closing in on the last steps, including update my historically sluggish VMWare 3 XP image. Today I downloaded a trial version of VMWare 5; annoyingly the download is 5.0 and the first step is to upgrade to 5.01.
During the installation VMWare 5.0 offered to free up disk space; my Win XP VM had again swollen to 120GB . After clean up and conversion it turned into a single 50GB file. This surprised me; I'd previously used 2GB stripes because I hoped Time Machine backup would be less affected. I suspect VMWare strongly prefers the single file model. I also took this upgrade opportunity to tell the VM to use two cores, and I shrank the XP memory allocation to the recommended 512MB  and set Windows internal memory management to system controlled (default).
Probably thanks to the single file, but maybe due to the second core, the XP instance feels much quicker. In particular I'm hearing much less background disk access.
I'll stay with the single file for now, and I'll exclude it from my Time Machine backup. It will be copied by my nightly disk mirror and I'll keep an instance on another local drive.
 I shrank it in over a year ago, and use it very infrequently, so this large growth suggests a bug somewhere - VMWare, Windows XP, something about my setup. I'll have to keep an eye on it. I suspect at some point I might want to start over with a fresh XP image, but that's a painful thought. It's probably easier to just shrink the image periodically. In retrospect, I don't recommend converting an existing Windows system into a VMWare image.
 I could easily give it 2GB, but I suspect there's a reason VMWare recommends this modest allocation.
- Speeding up my sluggish XP Fusion VM
- Shrinking a pre-allocated Mac VMWare Fusion virtual machine image
- VMWare Fusion 3: Migration, PowerPoint and Shrink Disk (my initial VMWare 3 impressions)
- VMware Virtual Machines - the backup problem; Windows, not Mac, but suggests that backup/restore of the multi-file VM model can be problematic.
- How to fix permissions in an OS X Package and how deal with VMWare Fusion Insufficient Permission problems