BTW, this problem is larger than this post implies.
OSX uses a different unicode sequence for letter-with-umlaut (or other accent mark) than Linux.
OSX uses Normal-Form-Decomposed (or NFD), where the letter and umlaut are separate unicode characters.
Linux uses Normal-Form-Composed (or NFC), with a single unicode character.
In my Linux guest OS, filenames were not matching up with what I had stored from OSX in my git repository. This is apparently a problem anytime you share a git repository between Linux and OSX.
So, it does look like vmhgfs is correctly translating filenames (when Linux is correctly configured), but you may run into trouble if a filename is stored in a file (like in my git repository).