Poor mouse performance on Windows 2008 due to the display driver (http://kb.vmware.com/selfservice/microsites/search.do?language=en_US&cmd=displayKC&externalId=1011709) is fairly well known. Just replace the SVGA/VGA display driver detected in Device Manager with the WDDM one as described in the article. However today I had a similar issue on a Windows 7 VM that showed the same problem. Reinstalling the WDDM did not fix the issue.
In the end the problem was relating to the mouse driver installed.
Automatically updating the “PS2 compatible mouse” driver didn’t find anything. The fix was to manually select the “VMware pointing device” from the list of available drivers.
As soon as I’d done that the mouse was smooth as ever!