Nevím co pořád vymýšlíš s failsafe módem. Z nápovědy (install.chm, mám Vmware (GSX) Server, ne Workstation):

Installation Steps
Insert the Mandrake Linux 10.1 CD in the CD-ROM drive.
Power on the virtual machine to start installing Mandrake Linux 10.1.
Follow the installation steps as you would for a physical machine. Be sure to make the choices outlined in the following steps.
Use the text mode installer. At the opening screen, press F1 for options, then enter text for text mode.
In the partitioning step, unless you have special requirements, it is all right to let Mandrake Linux automatically allocate the space. Select Use free space.
When you reach the Summary screen, configure the graphical interface.
Select Graphical Interface, then click Do. Make the following selections:

The resolution and refresh rate you want your guest to use
VMware virtual video card
No when asked if you want to install updates to the packages
No when asked if you want to start X when you reboot
This completes basic installation of the Mandrake Linux 10.1 guest operating system.