In case anyone makes the same mistake as I did and added the old /var volume back into the new 1.1 VM, this is how you fix it if you told it to keep the /var on the root partition:
(You can do all of this while the VM is running, at least on VMWare)

- Remove old /var disk.
- Create a new disk for the /var volume.
- Log in to the console as root (not ssh)

What you need to know at this point:
When looking at the device nodes for the virtual disks, 0:0 will be /dev/sda, 0:1 will be /dev/sdb and 0:2 will be /dev/sdc.
The order for devices will be 2:1, where the lowest number is always /dev/sda, which tends to be 0:0, so 0:0 (sda) 0:1 (sdb) 1:0 (sdc), the first number is the controller number and the 2nd the disk number.
You can *probably* also check the 'dmsg' output and the new drive will be at the bottom.

Replace 'sdc' with your var drive identifier.
As root:
# fdisk /dev/sdc
Type p just to check if there are no partitions on the drive and you picked the right one.

Type n to create a new partition, make it a primary partition with nr 1, accept the default values and it should work.
exit fdisk by typing w (save and quit)

Now we need to format the new partition:
# mkfs.ext3 /dev/sdc1
(could also make it ext4 but everything else seems to be ext3)

Now comes the trickery to change the var folder around with a mount point.
First we switch to runlevel 1.
# init 1

This will stop most of the services and it will ask for a root pw.
Now we mount the new drive and copy everything over, move the old var out of the way and mount the new drive in its place.

# mkdir /mnt/var
# mount /dev/sdc1 /mnt/var
# cd /var
# cp -ax * /mnt/var
# cd /
# mv var var.old
# mkdir /var
# umount /mnt/var
# mount /dev/sdc1 /var
# ll /var (just to check)
# vi /etc/fstab (or whichever editor you're comfortable with)

Obviously we want to mount the volume again on reboot, so add the following line to your fstab:
/dev/sdc1 /var ext3 rw 0 0

Save and exit and reboot the appliance and you're done.

Obviously it's better to add the new disk *before* starting the vm for the first time but I missed that part in the documentation :-)
Hope this'll help someone else.