Will disabling VM Activation still allow VDI usage?

If I set VM Activation to False, will users with a VDI desktop be allowed to active a license or will they also be excluded?

If you disable VM activation then any activation from inside a VM will fail. If you wish to prevent users from using the same license key, try setting user lock. This way each user will require a new license key (or consume new activation) for the same machine.

I get that, but my exact question is: Does Cryptlex think a VDI desktop IS a VM yes or no?

We haven’t checked yet, if it uses a VM it will consider it a VM.

What about a Citrix session? Does Cryptlex consider a Citrix session a VM?

You need to check that out. Try disabling the VM activation by default, if it returns VM error then it treats it as a VM.