I had this problem initially, it can be tricky on some machines and one of the most popular reasons is a shortage of space. 20Gb minimum required for the upgrade. There's also plenty of geeky stuff on you tube for these type of errors.
After some research I focused on the fact that my VM had 3GB of memory, and there was talk that this was problematic (more would be better). I couldn't seem to add any memory to the VM, or, rather, adding memory didn't increase the memory available to Windows. I assume now this is because it was a 32-bit version of Windows 7. So I started over with a 64-bit version of Windows 7, and successfully upgraded that.
After upgrade I
DID in fact experience the latency issue, although, it seems not nearly as pronounced as others have related here. It's missing a keystroke every 20 or 30 keystrokes, and occasionally a mouse click, but nothing worse than that. What I've experienced is somewhat annoying but certainly wouldn't prevent me from running a tournament.
I'll keep trying.