1. Shutdown your VM.
2. Make a copy of the latest state (or the one you want to extend the disc for). You can’t keep snapshots across extending the disc.
3. Open command prompt, and go to “c:\program files\vmware\vmware workstation”
4. Run the command vmware-vdiskmanager –x 10GB –t 1 “path_to_VMDK_file” . This will extend the virtual hard disc at the path defined to be a 10GB disc, stored as growable 2GB files.
5. Start the VM. Go to Disk Management, and you’ll see a bigger disk, now with a large unallocated space. You need to extend the partition into that space.
6. If it isn’t installed already, install DiskPart (which can be downloaded from Microsoft). This is a Microsoft tool, and is built into Windows 2003 Server. However, it works on 2000 and XP too.
7. Open a command line, and run DISKPART
8. Type list volume
9. From the list, identify the volume you want to extend (2 in my case)
10. Type select volume 2, where 2 is your volume from 9) above.
11. Type extend.
12. Job done.

Based on some instructions from here, but I think mine are simpler…