FWIW Paul I've had no trouble using W2K ftp to connect to my VM's. Red Hat 7.0/7.1/Progeny Debian/Mandrake/etc. I've had trouble getting a local connection before when installing a new version of VMWare for the first time, but once you figure out the right network voodoo, it works for all subsequent guest installs.
Also, I invariably disable almost all security on the guest VMs. Since I sit behind a firewall and I'm the only user on my home office lan, it's one less complicated thing to have to worry about.
YMMV.
