Is it possible to convert the current OS X Lion 10.7.1 install on my Mac Mini (i5, 8GB RAM) into a virtual machine via VMWare converter? I use VMware Fusion 4.
Or, is my only option to set up the virtual machine from scratch?
OK here's a method but it might not work.
Create a VM with two hard drives, install Snow Leopard or whatever you have on one hard drive, now boot into the VM and Super Duper Clone your Lion installation you want into the second Hard drive you have, you will then be able to boot into the new Hard Drive with all your data.
I did something similar a while ago. I had to clone my running computer to a USB disk. Then set up a basic VM with 2 disks, the first disk with minimal install of OS X, the 2nd virtual disk with enough capacity to hold the contents of the running computer. Then boot up the VM, attach the USB drive with the cloned system, then clone from the USB drive (within the VM) to the 2nd virtual disk. Then shutdown the VM, and edit the settings to boot from the 2nd virtual disk (likely this could be achieved using System Preferences from with OS X on the Virtual Machine, and selecting start up disk). Once completed when you boot, you will boot from a cloned image.
The reason I had to clone to USB disk is that was the only way I could attach a real disk to the VM. I could not access the virtual disk from the real environment. So, I had one option.
Things may have improved since then.