Backup fails with "Error message was: Asynchronous operation failed: VssSyncStart" (4042364)

When attempting a queisced backup of a VM it fails with

"The guest OS has reported an error during quiescing.The error code was: 5 The error message was: Asynchronous operation failed: VssSyncStart "

The new Vmware tools - VSS & VZshadow tools in ESXi 5.0 on 2008 and 2008 R2 machines

Note: This requires a reboot of the virtual machine. VMware recommends scheduling downtime before performing this action.

1. Uninstall VMware Tools.
2. Allow the system to reboot.
3. Reinstall VMware Tools. Ensure to click Custom Install.
4. Deselect VSS.