In VMware ESXi 4.1, by default, the video drivers are not correctly installed. This is because of the fact that the old driver (which is installed by default) is a WDM type of driver. This type of driver has been kicked out of Windows 7 and Windows 2008R2 in favour of the newer WDDM driver architecture. As a result, the video is reverted to the Standard VGA adapter, which has terrible performance.
However, installing the VMware Tools does provide a correct driver, even though it is not installed by default. To install it, see the second chapter of the article: Windows 2008 R2 console freezes in vSphere console.
It is not possible to convert disk files from thick to thin, in-place. Instead, cloning the disk (or machine) allows you to change the provisioning type and thus enabling to have a thin disk. After the clone is complete, delete the original and you're good to go.
You can either clone a complete machine, or just clone a disk using the CLI or service console:
vmkfstools -i <srcDisk.vmdk> -d thin <dstDisk.vmdk>