If your experience with VMWare was a few years ago, things have changed pretty dramatically with the introduction of the hypervisor in the current versions of VMWare (MS will be releasing theirs shortly).
Virtualization is suitable for production use as long as you've got all of your ducks in a row and understand the pro's/con's of the technology.
Virtualization is really all about the underlying infrastructure, done right virtualization works well, done wrong/cheaply it usually fails miserably. Probably the most important thing I've seen is that virtualization tends to place a lot of demands on the underlying storage layer which many SAN's/NAS's & fabrics/networks just aren't ready for. Also be prepared to see your storage needs skyrocket, as noted it becomes pretty easy to "spin up" new instances for A, B, C, D... definitely something you need to plan for.