ThinkVirt

For those that implement VMware solutions for environments that require FIPS compliance (e.g. US Federal Government customers), the VMware Lab Manager 4 installation may break with, “Error 28047: Setup failed to launch.” A look at the log shows, “system.InvalidOperationException: This implementation is not part of the Windows Platform FIPS validated cryptographic algorithm.”
There’s a hotfix (KB935434) from Microsoft for .Net 3.0, which is great if you are running 3.0. Unfortunately, if you are running .Net 3.5 SP1, your only recourse appears to be to disable the FIPS check, as outlined in this .Net Security Blog post.
To disable the check, you need to edit the .Net configuration file, which is located C:\Windows\Microsoft.NET\Framework\v2.0.50727\config\machine.config and add the appropriate code in the runtime section, enforceFIPSPolicy enabled=”false”

Now, reboot and enjoy. Keep in mind that if this setting is being applied by Group Policy, FIPS enforcement will be re-enabled (HKLM\CurrentControlSet\Control\Lsa\FIPSAlgorithmPolicy). You would need to remove the setting or GPO from being applied to the Lab Manager server.
Local Policy
“System cryptography: Use FIPS compliant algorithms for encryption, hashing, and signing = Disabled
The easiest solution is likely to install VMware Lab Manager prior to joining the server to the domain, as the password encryption action only happens during the install.