I'm using the latest Player, 6.0.3. I've found two issues with the Tools VMWare-SYSTEM directory, with a Windows XP VM.
1. It always seem to be created on C:\WINDOWS\TEMP, ignoring environment variables TMP and TEMP. I've tried uninstalling Tools, deleting C:\WINDOWS\TEMP\VMWare-SYSTEM (which is empty), ensuring the TMP and TEMP point where I want them to, but VMWare-SYSTEM goes back to C:\WINDOWS\TEMP\ when I reinstall Windows. Is it possible to force this directory to be in a location I choose? I'd describe this as a bug, but unimportant, unless there is a way to determine this..
2. A comment, not a question. This may be an artefact of the extremely cut-down and restricted version of WinXP I am using; it is not a serious problem once the workaround is known. I had a VMWare-SYSTEM with some old subdirectories and files in it from previous versions (the VM has been going since player 3, I think). I wasn't able to delete these items, and I wasn't able to change their permissions (as administrator); possibly due to the restrictions I had imposed on Windows. I booted in Safe Mode; I was still unable at first to delete the old stuff, but was able to change the permissions and then delete.