Changing any of the VM settings did not work for me (VMware 4.1), 
2.6.32-38-generic failed with udevd segfault.
Finally I installed the virtual kernel (apt-get install linux-image-virtual), 
which is suitable for VMware according to the Ubuntu Server FAQ:
https://help.ubuntu.com/community/ServerFaq#What_are_the_differences_between_the_server_and_virtual_kernels.3F

This installs a 2.6.32-38-generic-pae kernel and solves the problem.

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https://bugs.launchpad.net/bugs/659422

Title:
  Boot failure after upgrading kernel to 2.6.32-25-generic

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