I have an old VMWare Server 2 VM using Solaris 10 for x86 (10/09) which goes into a reboot loop early in the boot process.

I converted it to a single file VMDK (it was split into 2GB chunks).
Converted it to raw with qemu-img convert. I got an error while converting but no info about what actually went wrong. It also went from a 10Gb VMDk to a 127GB raw file!?

I created a VM in Proxmox 1.9 which created a 20GB raw LV in my LVM. Then I dded the raw file to the LV.

I don't get far past the GRUB menu and Failsafe seems to take slightly longer to fail, does anyone know what may be causing this?

The fact that you got an error during conversion and ended up with a 127GB disk is slightly worrying, I'd start looking at that before attempting to boot whatever the result contained.

It does look suspicious but I can't find any kind of debug or logging option on qemu-img convert that will tell me what it's doing so I tried converting with VBoxManage. I decided to stop it when the raw file is generated reached about 95GB from the original 10! I suspect that it's because 127GB is the max size I set the VMDK to grow to. Is there any way of converting what's only been used?

Have you tried virt-v2v ? - http://libguestfs.org/virt-v2v/