Okay, looks like going down the VMWARE route was a bad idea.
The clock runs very slowly. I am running the latest guest Cent OS 5 with Windows 2003 server as the host.
To fix the clock I can add nosmp noapic to the boot commands in grub.conf however this affects performance and causes slow page loads, etc.
I get 95% cpu most of the time if I use the fix.
Any ideas?
What VMware product are you using? Server of ESX ? And what is the server load of the guest?
Free version 
However, I am looking at using ESX soon. Is it worth it?
I have disabled the dual core now and the load has settled down, it’s average is 5.27.
It used to be into the hundereds. So I think by disabling dual core at VMWARE level has helped.
i’m currently evaluation my new server setup. Interworx + CentOs will be running on some virtualization software. Yet I don’t know which platform
I tried XenExpress which worked very good. Yet I have a lot of experience with Vmware Workstation so at this moment i’m trying the “free” VMware server with host Windows 2003 server. To do some benchmarking i’m running FreeBSD, CentOS and Windows XP Pro on it. Yet same problem like you, CPU util was 100%. So like you already figured out they key was to disable the 2 CPU option. Virtual SMP is currently beta.
[edit] about ESX, i really don’t think it is worth the $
Cost is high, performance advantage small, it is a propriatory OS so if you have any trouble it is not easy solving them, only some selected hardware is support so if you s-ata controller is not supported you cannot use it.
I just switched from my Host Windows 2003, it is a memory hog, and most likly each month you have to reboot in order to apply patches. Now i’m going to install CentOS as host for VMserver and test. So either my setup is going to be XenExpress or CentOS + Vmware server.