From Fedora Project Wiki
This page will be a collection of tips for running Fedora in VMWare.
Fedora 7
If you're upgrading from a previous installation, you will need to switch your disk to "buslogic" emulation. See: http://kb.vmware.com/selfservice/microsites/search.do?cmd=displayKC&externalId=1216
Upgrading a FC6 image to F7 using the rescue ISO image seems to work after the above.