To install VMware Server 1.x:

Install the following packages if you don’t already have them:
aptitude install build-essential linux-headers-$(uname -r) openssl libssl-dev psmisc
Untar the package, navigate to vmware-server-distrib directory and type
./vmware-install.pl
To install VMware Tools:

The following packages are needed in order to install VMware Tools:
aptitude install build-essential linux-headers-$(uname -r)
Open VMware Server Console and Click VM – Install VMware Tools. Then go to your guest Debain VM and mount the CD:
mount /dev/cdrom
I usually copy tar files to the hard drive and extract:
cp /media/cdrom0/VMwareTools-1.0.8-126538.tar.gz /root

cd /root/
tar -zxf VMwareTools-1.0.8-126538.tar.gz
If you want to directly untar it to another directory:
tar -zxf /media/cdrom0/VMwareTools-1.0.8-126538.tar.gz -C <directory>
Navigate to vmware-tools-distrib and execute the install command:
./vmware-install.pl
Follow directions and you should be able to install VMware Tools without incident.

Note: If you are running an early release of Debian Etch you may be asked to provide path to C compiler directory. That means you do not have a compiler installed and will have to install the following two packages:
aptitude install gcc-3.4 g++-3.4