Symptoms
•Cannot copy and paste from the virtual machine remote console to the system in which the vSphere client is installed
•The Copy and Paste options are disabled in vSphere 4.1
Note: This functionality was enabled by default in earlier releases of vSphere.
Resolution
Starting with vSphere 4.1, the Copy and Paste options are, by default, disabled for security reasons.
 
To be able to copy and paste between the guest operating system and the remote console, you must enable the Copy and Paste options using the vSphere Client. Alternatively, you can use RDP (Remote Desktop Protocol) to connect to the Windows virtual machines.
 
To enable this option for a specific virtual machine:
1.Log into a vCenter Server system using the vSphere Client and power off the virtual machine.
2.Select the virtual machine and click the Summary tab.
3.Click Edit Settings.
4.Navigate to Options > Advanced > General and click Configuration Parameters.
5.Click Add Row and type the following values in the Name and Value columns:

◦isolation.tools.copy.disable – false
◦isolation.tools.paste.disable – false

Note: These options override any settings made in the VMware Tools control panel of the guest operating system.

7.Click OK to close the Configuration Parameters dialog, and click OK again to close the Virtual Machine Properties dialog.
8.Power on the virtual machine.
Note: If you vMotion a virtual machine to a host where the isolation.tools.*="FALSE" is already set, the copy and paste options are automatically activated for that virtual machine.

To enable this option for all the virtual machines in the ESX/ESXi host:
1.Log in to the ESX/ESXi host as a root user and open the /etc/vmware/config file using a text editor.
2.Add these entries to the file:

isolation.tools.copy.disable="FALSE"
isolation.tools.paste.disable="FALSE"

3.Save and close the file. The Copy and Paste options are only enabled when the virtual machines restart or resume the next time.
Note: These options do not persist after an upgrade. If you upgrade to a newer version after enabling these options, the changes are lost and you may have to re-enable them.

Also, VMWare took menu mount for the vmwaretools iso away. To install vmwaretool, user has to use the GUI they provided which is: right click the vm and choose guest then install/upgrade vmwaretools.