Insufficient privileges on target machine when trying to virtualize

I am trying to virtualize a Win XP workstation. When setting up the viruatization using the option VMare Workstation 8 - Virtualize a Physical Machine, I am entering the user name and password of a local admin account on the target machine. I then go through the next 2 screens and then click the button to start the process. A progess bar displays for about a min and then I get an error telling me to make sure I have sufficient rights on the tartget machine. This local admin account has full rights on that machine.

I have virtualized 2 other machines already with no issues. However, everytime I try this machine, I get this error. Any suggestions?