Hi cookieme,
The panic is occuring because your VM still contains the VMware Tools from Fusion 4.1.1, and that release is not compatible with Mountain Lion: Specifically, the vmmemctl driver triggers a guest kernel panic during boot, as you've found. Since you're now running Fusion 5.0.2, try restoring your pre-Mountain-Lion VM snapshot (you do have one, don't you?), updating the VMware Tools inside that Lion guest, and then proceeding with the upgrade to Mountain Lion inside the guest.
Please let us know if that solves the problem for you!
Cheers,
--
Darius