[Gamester17]

XBMC will not run smoothly under VMware as XBMC's GUI engine requires hardware accelerated 3D graphics (OpenGL 3D to be precise) to be rendered the GUI smoothly at an acceptable framework. Without real hardware accelerated 3D graphics you will get less than 5 frames per second rendered by XBMC's GUI, even on a very fast computer.

You might be able to get it running smoothly under VirtualBox, as VirtualBox is currently the only virtualization software which offers hardware accelerated 3D graphics, that is as long your underlying hardware supports it and you install the proper graphics drivers in XBMC Live:
http://www.virtualbox.org

VirtualBox 2.2.0 is first virtualization software to support OpenGL 3D acceleration for Linux:
http://www.virtualbox.org/wiki/Changelog

See their UserManual.pdf section 4.8 (page 70) on hardware 3D acceleration (OpenGL):
http://www.virtualbox.org/wiki/End-user_documentation

[EDIT]: I guess simplest would be if the next version of XBMC Live shipped with this graphics driver for VirtualBox!

Suggest you submit a feature request ticket on trac for it http://trac.xbmc.org