Today is the first time I ran "sudo apt-get dist-upgrade" on the machine that runs VMWare Server 2 on Hardy Server. It's actually a lot painless than I expected. All I needed to do was to run "sudo vmware-config.pl" after the kernel upgrade. The only thing I didn't quite know to do was to have the headers ready before the vmware recompile. That's just a "sudo apt-get install linux-headers-$(uname -r)".
Then I sorta did the same thing on a Ubuntu guest (Hardy as well with a generic kernel), expecting to run vmware-config-tools.pl. But that turned out to be unnecessary. Not sure why, as I had so much trouble last time.