Definitely there is an issue running Windows 2008 R2 Service Pack 1 (SP1) VM on ESX 3.5.
We have several VMs running SQL Server, IIS, SharePoint and Project Servers. After lot of timeout issues, I decided to spend a couple of hours to research where the issue is.
I saw the VM is using almost all memory and only 25MB of free memory is available.
I started disabling all services (IIS, SharePoint, SQL, Antivirus) and rebooted server. Server still using around 3.8 GB of RAM of 4GB.
Rebooted on safe mode, using 380 MB! Rebooted on safe mode with networking around 460 MB!
Then I compared with others servers (1 VM and 1 physical server). Same issue on the VM, but physical server was using around 800MB of RAM.
I decided to uninstall VM Tools and viola! Issue resolved.
