While the size of the virtual hard drive can be made larger and in most situations once the virtual partition is created it can then also be dynamically resized, unfortunately the exception in this case is with OS X because VMware uses a preformatted virtual hard disk that is include in the VMware Fusion app (preformattedHFSVolume.vmdk) it cannot be dynamically resized. Meaning that even though you can change it in the Virtual Machine's Settings from its default of 40 GB to say 400 GB the only way to access the additional 360 GB is to destructively delete the existing 40 GB partition and create a new 400 GB partition and then install the OS.
Another option would be to add another right-sized vHDD and then partition and format it and restore the user data from Time Machine to it. (If Time Machine will allow the redirection.)