We upgraded to Virtual Center 2.5 and our XP deployments failed to join the domain. When I logged onto the VM I received a popup about an unsigned driver issue for the network card. Turns out a patch to the network driver in ESX 3.0.1 updated the driver to version 188.8.131.52 and there was a version of it in C:\WINDOWS\system32\ReinstallBackups. ESX 3.0.2 has a version of 184.108.40.206 so it looks like the problem was resolved within ESX itself.
I am not sure what changed in the deployment process for this issue to show itself after a VC upgrade, but here is what I did to resolve the issue in the template.
Convert to virtual machine
Uninstall VMware tools and reboot
Dismiss hardware dialogs
Delete the VMware driver folders in C:\WINDOWS\system32\ReinstallBackups
Delete lgotsync, vmmouse, vmx_svga, and vmxnet from windows\system32\drivers
Search for driver files in other locations and delete them