I have seen GREAT performance hosting minecraft servers on VMWare. No experience with other hypervisors and minecraft...

Performance is typically different with different plugins installed however overall I have been really happy with minecraft performance on our VMWare servers.

We allow it, and haven't noticed any bottlenecks caused by gameserver clients, though we try to distribute clients running gameservers evenly among our host servers.

I would highly suggest against permitting this, you will face a myriad of resource abuse issues plus potential legal issues too.