When I try to install WMware Server in Windows 7 (also happened on Vista and XP), I get the message Error 1327 Invalid Drive S:\ and the installation aborts.
For some reason, the VMware installer does not like when you change the default location of your shell folders. I have my Windows shell folders (My Documents, My Music, My Video, My Pictures) mapped to a network drive S:.
The workaround is to temporary change your shell folders back to the default location. An easy way to do it, it is by changing the User Shell Folders registry key. Be careful when editing your Windows registry, so use the following steps at your own risk.
1. Run regedit.exe
2. Locate the following key: HKEY_CURRENT_USER\Software\Microsoft\Windows\CurrentVersion\Explorer\User Shell Folders
3. Click on File, Export and save this key to your desktop.
4. Change all entries that uses your mapped drive (S: in my case) to the default one (%USERPROFILE%).
5. Now, Install VMware Server.
6. After installation completes, restore your User Shell Folders registry info by double clicking on the file saved on step #3.
That is, you were able to install VMware server and also keep your shell folders at you custom location. I hope VMware folks fix this issue on their installer. Other people were also having this same issue when installing VMware tools.