File already has an encoding “UTF-8” when starting a VM in ESX 4.x

In the vSphere client, select the ESXi or ESX server (Not your VM!) and click the ‘Configuration’ tab on the right.
On the left, under ‘Hardware’, select ‘Storage’. This should show your datastores to the right.

Right-click on the datastore on the right that contains your VM and select ‘Browse Datastore…’. This will bring up the Datastore Browser.
Double-click on the ServerName (where ServerName is the name of your server) folder.
Right-click on ServerName.vmx and select ‘Download…’. Save it to some temporary spot on your computer.

Open this file in your favorite text editor (Scite is one worth looking at) that supports Linux text files. (Linux and Windows use different newline characters)
Find the offending line and delete it. It should be something along the lines of: .encoding = “windows-1252”

Save the file.

Back at the Datastore Browser, click on the button that looks like a stack of coins with an up arrow and select ‘Upload File…’.

Upload the file you made changes to and enjoy a fully functional VM again.