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To fix this problem, change the copy/paste preference in the console for the virtual machine.
In the GSX Server Virtual Machine Console, select Edit > Preferences > Input. Clear the Copy and Paste: enable copy and paste to and from the virtual machine option.
If you are not using the GSX Server Console, add the following
line to the preferences.ini file on the remote machine:
pref.exchangeSelections = "FALSE"
The file is located at:
c:\documents and settings\\Application
Data\VMware\preferences.ini.
To correct this upgrade to VirtualCenter 2.1 or later.