Recently I had this error on some virtual machines that I was trying to migrate from ESX 2.x to ESX 3.x via VirtualCenter. Read on for what the problem was and how it was fixed. 

I had a number of machines that originally ran on GSX server. When we moved to ESX 2.x we imported these virtual machines at the command line and they ran happily on ESX 2.x for a long time. As part of our VI3 implementation and upgrade, these machines needed to be migrated on to the ESX 3 cluster in Virtualcenter.

Every time I tried to migrate them, I got the error "host does not support the virtual hardware version of the virtual machine". Normally the resolution to this error is just to right click on the virtual machine and select "Upgrade Virtual Hardware". This starts a task that upgrades the virtual hardware to the version of the host you are running on. This task appeared to complete successfully but in fact did nothing at all.

I could tell this by checking the .vmx file of the problem vm's. If you were to log in to the ESX host and actually view the .vmx file, you will notice two parameters that define the virtual hardware version of the machine. The first one is config.version "x" and virtualHW.version "x" where x is a number based on the host OS. GSX had these numbers as 6 for the config and 2 for the virtualHW. ESX 2.5.2 has 6 for the config and 3 for the virtualHW. My Virtual machines had not had the hardware correctly upgraded as part of the command line import that was done on them back when they were moved from GSX.

The resolution had to be to upgrade the virtual hardware, and let me just say if you are new to ESX server please do not try and edit the .vmx file directly to change this version. The upgrade virtual hardware option does much more than just that. You will break your vm and nobody will be happy. To get the "upgrade virtual hardware" task working properly, the vmware tools had to be upgraded to the correct version. Not just an upgrade, but a complete uninstall and reinstall of VMware tools.

The upgrade virtual hardware option interfaces directly with the vmware tools in the virtual machines and if you do not have the correct version running then you may encounter a similar issue to this one. So if you are getting the error message "host does not support the virtual hardware version of the virtual machine" and you cannot upgrade the virtual hardware properly, then VMware tools is more than likely to be the problem. Make sure you have the latest version and try again!