Hi jhevesy, and welcome to the VMware Communities!
An Input/Output error typically indicates that the hard disk in your Mac is corrupted or failing. As you're also encountering problems trying to copy the VM, it's highly likely that the corruption or failure of the disk is the underlying cause of the problems with Fusion.
If you don't already have a recent backup of your most important stuff on your Mac, you should make one immediately. (Don't overwrite your next-most-recent backups.)
You should probably then use Disk Utility to check your disk for structural problems (use the Verify Disk button on the First Aid tab) – or use DiskWarrior or your preferred disk tools. You can also try using Apple Hardware Test to examine your Mac's hard disk for physical problems.
Good luck!
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Darius