I recently have had to add space to an existing virtual disk and have used vmkfstools utility to expand the disk size. I found an excellent article explaining how to do this. This is also handy because you do not have to use any special partition managers such as Partition Magic, Volume Manager or ServerMagic to expand the partition seen by the VM, however you do need an Windows Server 2003 VM you can readily shutdown and restart. Check out the article at VMProfessional on how to resize a virtual disk. You can read more from VMWare: Adding Space to a ESX Server Virtual Disk and Using vmkfstools. Note that these articles are for ESX 2.x, but they also work for ESX 3.0 (this is what I am currently using).