Domain controller upgrade

If installing a new 2012 DC alongside your 2008 DC is not an option, then I would follow the manufacturer's instructions carefully:

https://docs.microsoft.com/en-us/windows-server/identity/ad-ds/deploy/upgrade-domain-controllers-to-windows-server-2012-r2-and-windows-server-2012

No, We have a existing forest with windows 2008 Dcs and one win 2012 r2 dc.

What we are trying to archive is  raise domain functional level to 2012 r2.

Hence question about experience of Upgrading dcs on vmware running windows 2008 standard sp1 to windo2ws 2012 R2.

Ah well then you have a safety net :)  Have fun storming the castle.

VMware?  That seals the deal. Install new DCs as new VMs and retire the old. In place upgrade should be a last ditch necessity. And since you are already virtualize, that isn't the case here.

Sorry should have mentioned that I have restrictions on adding new vms as don't have enough disk space on the infrastructure and the dc in question is running file services aswell as its a dc

In that case redundant DCs is a luxury you can't afford.  Just demote the 2008 DC to a member server and add another 2012 when resources allow.

Sorry should have mentioned that I have restrictions on adding new vms as don't have enough disk space on the infrastructure and the dc in question is running file services aswell as its a dc

A new VM should take 20-30 GB for the OS.  Install it. Migrate AD.  Then disconnect the virtual hard drive with the file shares and connect it to the new VM.  You're setup properly with DFS Namespaces, so server names don't matter, right?

Another question - WHY do you need to raise the functional level?  What feature are you trying to implement?  It seems you have other problems you should be addressing first - such as disk space in your VM environment.

DFS works better in windows 2012 r2 and to take advantage of group policy in win server 2012 r2.

Neither of those are based on the domain or forest functional level.

really? on what basis. DFS works better in win 2012 r2 is what is being suggested by many experts and raising dona in functional level allows you to take advantage of gp objects that are not available on win2k8.

I suggest you review what features are actually introduced with each FUNCTIONAL LEVEL (terminology matters!)

https://docs.microsoft.com/en-us/previous-versions/windows/it-pro/windows-server-2008-R2-and-2008/cc754918(v=ws.10)

*NOTHING* in the feature list between 2008 and 2012 R2 involves DFS or Group policies.

While there are NEW group policies available in 2012 R2 and enhancements to DFS, why would you want to poison your deployment by doing an IN-PLACE Upgrade.  Migrate to it - fine - but do it right!  If you have disk space issues on your VMWare server, FIX THEM.  Add disk, remove old data, whatever.  No upgrade can ever be as stable as a clean install.  If you care about the reliability of the network, that's what you'll do.  Few experienced IT folks would recommend - let alone do it themselves - in place upgrades.

BTW in place upgrade of 2008 r2 dc to 2012 r2 works dc. it takes a couple of hours but it works....