"I have finally figured out what the issue was and it actually relates somewhat to one of my questions at SO, stackoverflow.com/questions/1352899/source-install-apache-2-2-13-php-5-3-snow-leopard which ironically I also had to answer for myself.
The issue stemmed from the package iconv. Apparently compiling and installing PHP 5.3.0 has issues on Snow Leopard 10.6.1 with this package. So I deleted all occurrences of files that relate to this package from my system and rebuilt them from source in both i386 and x86_64 architectures. Unfortunately I deleted a very important file that VMWare Fusion required: /usr/lib/libiconv.2.dylib
The way that I realized that this file was the key to restoring VMWare Fusion was that I ran the following in terminal: /Applications/VMware\ Fusion.app/Contents/MacOS/vmware and said that the Following Resource was missing: /usr/lib/libiconv.2.dylib
So I went hunting in TimeMachine and luckily located the deleted file, restored it, and now all my VMs work again!
The question now is why is this file so important?"
But I have seen this behavior with Parallels as well... Throw out the old VMWARE fusion application, and re-install from the latest disk image from the VMWare site....
Re-installing with the application in place doesn't guarantee that everything will be re-written..."