Rio,
It seems that the problem is the Windows Server installation media is not compatible with your current VM type ?
eg. 32 bit Windows Server 2003 upgrade or inserted with WIndows Server 2008 64 bit media.
So what OS detail you currently have and what are you trying to upgrade into (and also the role of the server eg. Domain Controller or Exchange Server)?
One thing to consider is that the ESX host is not able to host 64 bit OS ? Please run GRC secureable - http://www.grc.com/securable.htm and let me know if the host CPU is able to deploy 64 bit OS.
