Simple VMware Question

I'm using VMware to run a bunch of virtual machines for school, and I also have a VM of XP that is doing just bit torrent, and i have peer guardian running on that. Since the host computer is what is really connected to the internet, do i need to be running peer guardian on the host pc to block any bad ip's, or is it ok to just run it on the virtual machine? Just trying to wrap my head around how VMware networking works. thanks!

Depending on how you have the networking setup. If you are using passthrough and your vm's are getting it's IP from your home router, then just run it on the vm. If you are doing some vmware NAT stuff, where you ahve a private network inside your host and your host server is assigning the IP's to the VM's, then i would run it on the host as well.

... in either case peer guardian won't prevent you from getting a cease and desist letter (best case scenario) from your ISP (unless of course your seeding/leeching doesn't violate copyright).

Whatabout using the encryption feature in Utorrent to only xfer via encrypted connections (or something like that). Doesn't it just look like a bunch of SSL traffic to your ISP?