This issue is caused by a problem with the Scsiport.sys drive.
This is not a VMware issue. For more information about this issue and for a hotfix, see the Microsoft knowledge base article link.
Note: The preceding link was correct as of March 22, 2010. If you find the link is broken, provide feedback and a VMware employee will update the link.
To resolve this issue, apply the hotfix before performing a conversion.