I don't know if anyone really wanted to know, but I did and couldn't find when i was looking, so here for reference:

Download the VMWare appliance maemo SDK 4.0
Unpack it with the 7zp uncompressor (yay - another uncompressor).
Fire up parallels transporter, select advanced mode and convert the disk image. It will tell you that it is not bootable, it is wrong.
Don't worry that it has gone from 7GB to 4GB

Make a new virtual machine with ubuntu linux and use the disk image you have made. Boot it up. It will boot but fail to start the x-server.
It may need a couple of reboots to get to the login (maemo/maemo) but when it gets there, run:

sudo dpkg-reconfigure -phigh xserver-xorg

and select the vesa driver. Problem is that it wasn't the vmware driver, which is why it cant start.

ok, not the fountain of knowledge, but it took me a while to work it out!