Something I discovered is if I replace the 32 bit wim with the 64 bit wim file (these files are from the resource kit), it boots just fine. The hardware in vmware settings is Win 7 and not Win 7 64 bit, yet I can vboot just fine to the 64 bit PE 4.0 image and not the 32 bit. Unfortunately this isn't an acceptable work-around for me since we're trying to do this as real 32 bit only machines do, and just like it works with older versions of WinPE 32 bit.
PS - I now know of at least 4 other people who have this issue in Workstation 8 and 7, and I've tried around 15 different machines with various configurations (XP, Win2k8R2, Win7 32 bit, Win 7 64 bit) trying to get them to boot to 32 bit WinPE 4. These all work with the previous version of WinPE 32 bit. Since I know 32 bit WinPE 4.0 works on real hardware (and we've verified that), I'm guessing it just exposed a problem or a MS best practice that is getting skipped in vmware. I am interested if I would have the same problem if I were to upgrade to Workstation 9, but I'm expecting I would.