Do I need to install the VMWare workstation on my optane SSD to see the performance improvements or can that be installed on a regular SSD while the actual VMs are on the Optane?
It uses the drive that the vmdk is located and/or where you've set the directory for containers. Where you install workstation as the application itself is fairly irrelevant.
You wont notice any difference unless you are running like 10 VM's at once...a standard SSD is fine for more home users needs. So you could use it all on your standard SSD. Unless you have some higher I/O VM's you could put those on the Optane.
As noted, the installer of workstation its self does not matter, put it on the SSD.