Resolution:
When an engine running on a VMware starts a second level C++ service, it has been observed that these VMware servers are "hanging" intermittently for typically several minutes at a time.

When the service is submitted everything is fine and an empty service appears in the manager GUI. However, when a first task is submitted by calling the driver API, a delay of many minutes can occur. Mostly, after this delay the server continues and all the remaining tasks are submitted immediately and can be seen in the GUI.

During the delay period, a very high CPU usage in csrss.exe can be seen which handles user mode threading and console interaction and a high CPU usage in the device driver code on the virtual machine.

Workaround:

The issue appears to be with the VMware emulation of the console (csrss.exe) which is not able to handle the request properly from the engine driver to log into the system. As a workarround, LOG_TO_SYSTEM driver property should be set to "false" for a smooth run.

Second Tier C++ Driver hangs for several minutes when running on VM