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Some of my current Windows Server 2008 R2 machines are running the SVGA driver and most probably a buggy version (11.6.0.35). This buggy version can cause a server to hang or become unresponsive from both RDP/Dameware and the VMware console, however the server still responds to pings and other network requests normally.

VMware makes two different video drivers for VMs. They are called WDDM and XPDM (SVGA II). WDDM is the newer framework and should probably be the driver people use for Windows Server 2008 R2.  This issue can be solved by changing to the WDDM driver. Changing the driver requires installing the latest VMware tools (8.3.12-493255 for ESXi 4.1 or higher) and rebooting. The WDDM driver is located right next to the SVGA driver in: c:\program files\common files\VMware\drivers\wddm_video. It should also be noted that VMware prefers that people use the VESA video driver (the one included with windows), but this gives very poor mouse response, so I prefer other options.

You can download the latest VMware tools here:

http://packages.vmware.com/tools/esx/index.html


UPDATE 11/28/12:
This article should be read as well.
VMware KB: WDDM and XPDM graphics driver support with ESX 4.x, ESXi 5.x, Workstation 7 and 8, and Fusion 3 and 4
http://kb.vmware.com/selfservice/microsites/search.do?cmd=displayKC&docType=kc&docTypeID=DT_KB_1_1&externalId=1016770

On Server 2008 R2 running on ESXi 5.1, Device Manager appears to show the video adapter with WDDM driver as "VMware SVGA 3D" NOT to be confused with "VMware SVGA II" which is not recommended/compatible with Server 2008 R2

Keywords: vmware, esxi, esx, VM, server 2008 r2, hangs, video driver, svga, xpdm, wddm, svga II