When I last tried this, I had a single issue left. When I start an Xorg session, the initial size is unrelated to the size of the VMWare window but a simple click on "Fit guest now" fixed the issue. I did not have to restart open-vm-tools.

Is this what you are experiencing?

Can you confirm that your graphical session is based on Xorg? "ps aux|grep Xorg" should show a process. (The default session is again based on Xorg since kali-root-login 2017.2.0)

If you comment out "WaylandEnable=false" in /etc/gdm3/daemon.conf then you switch back to Wayland on next reboot (or gdm3 restart) and then this issue is not present (but you might suffer from other regressions).

Can you also attach your logs from /var/log/vmware-*

output from "ps aux | grep Xorg"

root@kali:~# ps aux|grep Xorg
Debian-+ 642 1.4 1.8 347872 38788 tty1 Sl+ 23:53 0:00 /usr/lib/xorg/Xorg vt1 -displayfd 3 -auth /run/user/132/gdm/Xauthority -background none -noreset -keeptty -verbose 3
root 985 3.5 2.1 409180 43904 tty2 Sl+ 23:53 0:01 /usr/lib/xorg/Xorg vt2 -displayfd 3 -auth /run/user/0/gdm/Xauthority -background none -noreset -keeptty -verbose 3
root 1583 0.0 0.0 12720 1012 pts/0 S+ 23:54 0:00 grep Xorg

I tried commenting out WaylandEnable=false in /etc/gdm3/daemon.conf then rebooting but that seems to have now made the GUI unusable :(

Will try and recover and provide my logs from /var/log/vmware-*.

Also do I need to have the VMware tools installed alongside open-vm-tools?

This issue is not present for me in the most recent daily image running under VMware Fusion. Logs attached after resizing, going full screen, and transferring files to and from the VM.

Also do I need to have the VMware tools installed alongside open-vm-tools?

No. open-vm-tools is the package of the VMware tools.

I just migrated from my old instance to a newly downloaded vm image of Kali, did the upgrade/dist-upgrade. Can confirm running newer version of open-vm-tools 2:10.1.10-1kali3 and not having any issues.

Please close the ticket.