I thought the fix would be to let it add the registry key and then manually delete it. However VMware workstation 12 keeps adding it back every time I launch the VM. This is seriously annoying.
Here's the related log entries:
2015-11-17T08:32:02.956-05:00| mks| I125: MsgHint: msg.keyboardHook.hookTimeout
2015-11-17T08:32:02.956-05:00| mks| I125+ The keyboard hook timeout value is not set to the value recommended by VMware Workstation. This can cause keystrokes to be lost when the host is under stress. We recommend that you allow this application to update the value. Once this value is updated, you must log out and log in again in order to have the value take effect.
2015-11-17T08:32:02.956-05:00| mks| I125+ Click "OK" to update the value, "Cancel" to leave it unchanged.