EEEK! In my original post on the VC 2.5 Update 1 upgrade process, I incorrectly stated that the VC database user needs full sysadmin on the database server for the upgrade, and pondered why that was the case. Well it turns out that is entirely NOT the case at all!
Had I RTFM, I would have seen that the VC database user just needs the db_owner role on the MSDB system database, not sysadmin on the entire server. This is apparently a requirement for the SQL Agent job creation. Curiously, although the documentation states this is a requirement for a clean install as well, you only get the permissions error if you run the interactive installer. If you permission the VC database user with only the db_datareader, public and SQLAgentUser roles on the MSDB system database (I work in the finance industry - least privilege is important!) then run the installer silently, you don't get the permissions error and the SQL Agent jobs are still created!
Thanks to John over at the VMTN blog and the VMware support guys for sorting me out on that one!