Few days ago I have upgraded my Ubuntu to latest 8.10 (Intrepid Ibex) and found that keyboard just doesn’t work in VMware Server Console. The problem was that I couldn’t use keyboard under guest operating system including Windows, Linux etc. After few hours of research I found simple solution which works for me:
$ setxkbmap
$ echo "xkeymap.nokeycodeMap = true" >> ~/.vmware/config
After this restart vmware-server-console and see if it helps. If not you can see other solutions of the same problem at this site:
http://nthrbldyblg.blogspot.com/2008/06/vmware-and-fubar-keyboard-effect.html
I hope it helps!