1. Re "If you connect the iPod while VMware Fusion is running the Windows virtual machine, does a dialog come up asking if you want to connect the iPod to the Mac or to Windows?" Yes, it does. I select "Connect to Windows".
2. Re "Did you use VMware Fusion to migrate your existing Windows PC system into a virtual machine? Or is the virtual machine a new Windows 7 installation?" I first set up this Windows 7 VM on my previous MacBook Pro Retina (a model from 2012), in an older version of VMWare. When I bought this latest MBP last month, I then a) installed the latest version of VMWare Fusion and b) transferred the Windows 7 VM from the previous machine by copying all the data to an external drive, then copying it to the new machine. Apart from a few minor configuration hiccups (and this iPod connectivity issue), the VM is running like a champ in the new version of VMWare Fusion on the new MBP.
3. So more data (and yes, this is very screwy but hey, it's software): I actually do have my iTunes library on the Mac side. The only reason I ever connect the iPod to Windows is to use OverDrive for Windows to transfer audiobooks in their old proprietary format (whose name currently escapes me). The workflow is: download data to Overdrive for Windows, run iTunes for Windows, connect iPod to Windows, then use the "Transfer" function in Overdrive to transfer the data to the iPod. I believe Overdrive is calling some iTunes API to perform a conversion and copy in the background.
Net net: If I could never connect my iPod again to this Windows 7 VM, I wouldn't be able to transfer some small subset of Overdrive audiobooks to my iPod. Not the end of the world. Still, I hate to lose functionality.