Couple things:
1. VMFS 5 is formated to a 1MB block size, this is normal.
2. Decrease your CPU to 2 or 3. Your sig lists you using a 4 core CPU, you are likely to incur some some high CPU wait times just from the hypervisor process running, let alone any other VM.
3. Remove your floppy and CDROM unless you have a good reason to use it. Disable it in the BIOS too.
4. Try removing your APC USB device.
It sounds vaguely like a resource scheduling issue, so try the CPU decrease first. As a general rule, a VM guest will ONLY run faster with more CPU's if it actually needs them to run, in all other cases adding more CPU's then is needed will slow it down. Official stance from VMware even is to use only 1 CPU if at all possible.