After a few weeks of every dead end imaginable, I finally found this page:
Windows 10 100% disk usage in Task Manager [SOLVED] - Driver Easy
and Method 7 was the solution. You must perform this IN the VM, not in the host. VMWare really needs to expose this solution on a broad scale because this is a serious performance issue and 'virtually' everyone will hit it.
Method 7: Fix your StorAHCI.sys driver
Note: A million thanks to our warm-hearted reader Javier for the following solution.
If you have tried all the above methods but still no avail, please see if this additional one helps.
The Windows 10 100% disk usage problem might also be caused by some Advanced Host Controller Interface PCI-Express (AHCI PCIe) models running with the inbox StorAHCI.sys driver due to a firmware bug.
Here’s how to determine if this is your problem and fix it:
1) Open Device Manager by pressing Windows logo key and X at the same time to choose Device Manager.
2) Expand the IDE ATA/ATAPI Controllers category, and double-click the AHCI controller.
3) Go to the Driver tab and click Driver Details. If you can see storahci.sys stored in a path of system32 folder, then you are running the inbox AHCI driver.
3) Close the Driver Details window and go to Details tab. From the drop-down menu, select Device Instance Path. Make note of the path, starting from VEN_.
4) Type regedit in the search box of Start panel, then hit Enter on your keyboard to run Registry Editor. Then go to:
HKEY_LOCAL_MACHINE\System\CurrentControlSet\Enum\PCI\ <AHCI Controller>\<Random Number>\Device Parameters\Interrupt Management\MessageSignaledInterruptProperties
The <AHCI Controller> here refers to the name you see from step 2).
The <Random Number> differs on different machines.
5) Double click the MSISupported key and change the value to 0.
6) Restart your computer after the change.