groovin, I know lots of folks using VMware for production data center stuff.
Unless you have strong technical staff, get ESX. It's expensive, and pretty much forces you to use expensive hardware, but when you're done you have a more solid and more likely to be successful setup.
VMWare server might be interesting when it comes out of beta. I can't really field something that will stop working in June.
JackMDS, Windows on top of ESX can be faster than Windows on top of native hardware, thanks to Microsoft's retarded I/O. It can be slower, too. Depends on your exact workload.