Thanks, but I just solved the problem! 
Your way might also work but I had already done this before I saw your message and it was very easy and works well.
So here is the guide to running Mountain Lion in VM Ware Fusion or Parallels with a partition larger than 40GB and allows you to import an old user account from Tiger, Snow Leopard, Lion, etc..or simply gives you more than 40GB for whatever reason you might have on the main VM disk without adding a second one.
1) Make sure to shut down Mountain Lion in VM
2) Under VM settings expand hard drive to whatever size you like
3) You will need either a disk image or an actual DVD of mountain lion, mount that in your VM and choose it as start up. After rebooting open disk utility and partition Mac HD which will completely erase the disk. Instead of only showing the 40GB limit it shold now show the size you created from step 2. Close disk utility and install Mountain Lion as normal. Reboot and unmount disk image so that it starts from your new installation.
4) You now have a virtual Mountain Lion with whatever hard disk size you chose.
5) Open migration assistant and do your time machine back up as normal from previous systems.
The reason you might want to do this are many. In my case I wanted to have my old Snow Leopard user account open and running on my second monitor since I just did a fresh install on my Mac Pro. It is easy to import audio, photos, videos but there was a lot of other things I want to take my time bringinging over. There are also many cases where I needed to open up an app and view settings. Now I have my old machine essentially running at the same time as my new install side by side which is fantastic.
(If you don't have a disk image of Snow Lion you can create a 2nd hard drive of any size, install it from the first drive using Mountain Lion installer, reboot then just delete 1st drive)
I am so happy to get this working. This will be so useful to have the old computer essentially running at the same time as my new one without importing all the old baggage I didn't want that slows things down.