Everything looks fine inside the guest. Here's what I was looking for:
[ 33.360] (II) VMware VMware Virtual USB Mouse: initialized for absolute axes.
The guest is expected to treat the VMware Virtual USB Mouse as an "absolute mouse", which is more like a Wacom graphics tablet than a real mouse. The use of an absolute mouse should enable auto-ungrab when you move the mouse to the edge of the guest window, even when VMware Tools is not installed/running. The logfile actually shows that we present two virtual meece -- one relative, like a normal mouse, and one absolute -- and the guest OS gets to choose the absolute mouse if it knows how to handle it, or it can use the relative mouse if it's an older OS that doesn't know how to use the absolute mouse.
Could you attach vmware.log next? Boot the guest and log in to get to its desktop, bump the mouse pointer against the guest screen edges a few times, shut the guest down, then collect the vmware.log from inside the VM's folder.
Thanks,
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Darius