I think you are misunderstanding what's going on. All the memory usage is done in the host, and the memory set for the VM is allocated, in full, in the host when you start the VM (VPC allocates the full amount instantaneously, VMware seems to build up to the set amount as the guest starts). What the virtualisation software won't do is allow the host to use more of it's memory than is set for the particular running guest(s), and if you do not set enough, the the guest will suffer the same lack of memory limitations as if it was running on bare metal (ie excessive paging to disk).

I can't say that I'd ever particularly notices what the gust VMs report memory usage as, but I rarely pay a lot of attention to that kind of thing, as the necessary tricks and dodges needed to allow the VM to be fooled cause it to misreport things like that. I do know that when Task Manager in a guest reports that it is maxed out, one core of the host CPU is actually running at around 25%, at least on my i7 rig, just to show that you can't rely to much on what the guest says it is doing.