I have had some time to digest VMWare now. I think the moment that I knew that moving to VMWare was a good idea was when a developer told me they needed a machine to deploy their new server on. 30 minutes later I walked into their office with the host name and login credentials.
During my evaluation of this I was worried about the performance drains across the multiple servers on one ESX host (physical machine). I also thought that I could achieve much the same affect by sharing a single server and changing port numbers around. The port numbering would be error prone...I can just picture saying "remember http://server:123 and NOT http://server:1234". Additionally the different ports would be a problem with some load balancers that cannot switch up ports, only hosts. Patching, machine reboots, shared system libraries would also be harder when sharing the same server across disparate machines.
All of that aside (as they are all solvable problems) the isolation that VMWare provides is an essential feature. By this I mean a spike in one servers usage will not bring down all of the rest of the servers. The VM's are really different machines (until you pull the power cord out, then they are the same machine). This of course is known. It is what VMWare is really about, but somethings in life you just need to see to believe, otherwise it is simply magic.
The final kicker is that if a physical host goes down you can migrate the VM to another physical host. You have to have a SAN setup to do this and more than one physical host of course. When done properly can actually make you think differently. When a server is freed of it's physical ties all kinds of new possibilities arise.
I am curious to try the xen hypervisor open source project and build a VM environment for my development setup...but after printing the very very large manual it will have to wait for some time.