Perhaps there is some incompatibility between the source and destination tar formats (just a shot in the dark, I am not familiar with tar internals)
Is it possible to try replacing the source machine's tar with the one from the helper? Follow this KB: VMware KB: Enabling Logging in to Helper Virtual Machine During Conversion of Powered-On Linux Sources with Converte… about how to log in the helper VM. Just start a dummy conversion and log in. Look for /bin/tar_1.20, scp it out of the helper to the source machine, backup and replace the original.
This is a clumsy workaround but there is nothing better I can think of.
HTH