I would suggest to get Vmware Converter 3.0.3, and install it directly onto the Win 2k3 source system. Make sure it's the only VMware Converter item in add/remove programs.
if it fails, then please attach the logs to your post. Logs can be generated from File Menu > Export Logs of the converter interface.
The logs show version 3.0.2u1 (3.0.3 is the newest version).
There is no error to be found. Typical when the issue is speed related.
Are you converting over a WAN link?
Have you doublechecked all duplex settings?
What is the network speed?
What else is this physical machine doing while converter runs?
What type of physical disks does the source have? (sata or scsi or ide etc)
What is the RPM speed of the source physical disks?