The main thing to know is that vmware server currently only supports processors with EM64T. The core duos don't have that, i.e., they aren't 64bit but core 2 duos are 64bit. In the vmware boards they talk about editing the configuration on vm server (beta) or workstation (i can't remember) which will allow the vm product to take advantage of VT enabled processors.

I haven't really found any info that talk about vmware utilizing virtualization in processors. In future released products they will.