This is because vSphere vCenter 4.1 has an apparent installation bug where it does not detect your domain, and is trying to authenticate your username against the local machine, not your domain.
To work around this, go to Start > Run >
lusrmgr.msc and create a new user with the exact same username and password as your domain account. Add this user to the local Administrator group.
Then, vSphere will permit you to enter the password and continue the installation.
After the installation is complete, you will need to go to the Services control panel (Start > Run >
services.msc), right-click on all the VMWare services that have that username specified and change the username to
[domain]\[username] (otherwise they will run under the local non-domain account and you may have access issues).
Credit where it's due, the VMWare Forums are very helpful in this topic.