This is interesting as I have just found the solution, the hotfix is not available for download, you will need to contact Microsoft or your server OEM to get the hotfix, note there are two different hotfix versions besides the 32/64bits, one is for Win7/Win2k8R2 with SP1, one is without.

Symptoms

When deploying or cloning virtual machines from a Windows 2008 R2 or Windows 7 template configured with the VMXNET3 virtual network device:

•The resulting virtual machine’s guest operating system shows the Ethernet network interface as:

- VMXNET Device #2 in Device Manager
- Local Area connection #2 in Network Properties

•The old Ethernet network interface remains present in Device Manager when Show Hidden Devices is enabled.

•The old Ethernet network interface retains its network configuration, preventing the new interfaces from reusing the previous static IP addresses. For more information see Networking Error: IP address already assigned to another adapter (1179).

Note: Upgrading the virtual hardware from version 4 to 7, or upgrading the VMware Tools, may automatically convert Flexible or VMXNET2 virtual network interfaces to VMXNET3. This issue may be observed after such an upgrade.

Also I encountered the following error when trying to open “Edit Settings” after converted the Template to VM.

Call “PropertyCollector.RetrieveContents” for object “propertyCollector” on vCenter Server “VC” failed.

The solution is simple, remove the VM from inventory and add it back again will solve the problem.

Of course, you also need to add back the extra VMX parameters if you are using OEM Windows and make sure devices.hotplug = false is added which prevents hot plug warning in OS.

* Just found out you don’t need to do this if you added the VM to Inventory from Datastore directly as the original VMX contains such information already.