I have a couple of VMWare guest machines (Windows XP & Windows 2003) with inappropriate sized disks. Instead of adding new disks I want to resize the existing ones. Quick search on Google revealed that this is quite easy to do. According to instructions found in Expanding a virtual disk and Increase your Virtual machine’s disk capacity the way to do it is:

1) Backup VM directory in case something goes wrong

2) After clean shutdown of VM resize the vmdisk with command line tool vmware-vdiskmanager.exe

cmd> "D:\Program Files\VMware\VMware Workstation\vmware-vdiskmanager.exe" -x 16Gb "D:\VM\WinXP\WinXPd2.vmdk"

3) In step 2 we extended “physical” disk for VM, now we have to expand disk at VM OS partition level as well. In Windows XP/2003 we can use diskpart command line tool for that (see second referenced document from above).
Start VM (Windows XP/2003), logon as someone with Adminisatrator rights and extend partition:

cmd> diskpart
diskpart> list volume
diskpart> select volume=n
diskpart> extend

In case you want to extend system disk then you’ll have to mount that disk with another VM and then extend the partition with diskpart.