I was running Ubuntu 7.10 inside VMware player and Ubunu's updater offered update to 8.04. I checked Ubuntu website and everything seemed to be fine so I proceeded with update. But after update I noticed that shared folders were not visible for the guest OS anymore and also other features were not working properly.

Reinstalling VMware Tools did not help because installation failed. After some searching I found a good blog entry by Peter Cooper. Despite the topic the described steps work very well also on VMware Player.