Xeon is not better in the sense of functionality, these CPUs are simply more stable due to being more rigorously tested. Essentially, they're the same chip as their desktop counterparts. If you wanna run more than one physical CPU, Xeon with 2P server class motherboard is the way to go though.
A workstation for VMWare, you'll need:
- A lot of RAM: this depends on how many guest OSes you wanna run but I say at least 6GB for triple channel i7 and 8GB for dual channel i5 or i7
- Fast CPU, any i5 or i7 quad core will do fine, one with HT is better. or you can use i7 gen Xeon that supports 2P if you prefer.
- Fast IO for running snappy guest -> good SSD.
I'm very surprised to find out that Xeons are simply "better tested" i7s!
I'm afraid to go Xeon because it's an "orphan environment" - much less knowledge on the Internet and forums, motherboards and cases with server form factors, much less selection, much higher prices. Of course, for larger organization this makes prefect sense but I'm working by myself...
Tempting as it is, I also don't plan on using two processors - one with HT and 4 cores (e.g. i7) would do fine. I need a development machine, not a multi-user server. The machine would run VS, Office, Subversion, CI, SQL Server and Web Server, each on its own virtual machine, but this load is not too high.
What I wanted to check is whether I'm missing some important capability for virtualization found in Xeons and server motherboards and missing in desktops. From your answer I gather this is not the case, so I'd stick with the i7.