Boot to Live CD with VMWare

Sounds like you may need to modify your boot order. I'm looking at VMWare Workstation 8, not 7, but when my VMs are shut down, one of the options that I see on the power menu is "Power ON to BIOS" and if I choose that option, I get a virtual BIOS that lets me configure the boot order. I assume that v7 has the same, or something very similar, and you just need to ensure that it's checking the CD-Drive for a bootable image before the hard drive.

It turns out that it was a stupid mistake. The CD-ROM was not "Connected at power on."

To change this, go to VM > Settings > CD/DVD. On the right site, there should be a couple check boxes for "Connected" and "Connect at power on." Make sure they are both on.

In other versions of VM Workstation you can access the "Power On To BIOS" option in VM > Power > Power on to BIOS.