Decided to try installing RC2 on VMWare Workstation today.
The version of VMWare that I used is the latest one.
The installation was done from an ISO mapped to the virtual CDRom. The installation experience is a lot better than RC1. The installation screen is shown in the correct color. It detects VMWare graphic card just fine.
After initial installation, sound, network card and cd-rom was having driver problem. After spending some time googling, I found the solution that I need to make it work.
Adding ethernet0.virtualDev = "e1000" underneath ethernet0.present line in the .vmx file fixes the network card problem.
The sound problem was taken care of once you go do a Windows Update from within Vista.
And finally, mapping the CD-ROM drive to a real physical drive and rebooting fixes the CD-ROM problem.
Here is the original VMWare forum thread regarding the problems above.