NFS, ISCSI and FC storage are all supported in VMware vSphere today. As some of the benchmark been done recently showed the performance of ISCSI and NFS had been improved versus ESX version 3.5.  In the benchmark report it show that the overhead on NFS and ISCSI were higher VS FC storage. With the latest processors chip from Intel and AMD, I believe the overhead on the CPU will not be the major concern as users are always considering to maximize the usage of the CPU power they have in the physical server.

We had been running Vmware in our environment for more than 2 years now in production mode and found that 80% of our production virtual machine should easily could be handled on either NFS and ISCSI. I will suggest to have FC and IP SAN in place within the virtual infrastructure. This will allow the administrator to select the right storage option to support the IO requirement for each system been hosted in VMware. The mission critical and high IO requirements systems will be deployed on  the FC SAN, but the low IO requirement virtual machines will be migrated to IP SAN. With the storage vMotion option in vSphere 4, this will able to be done with zero down time. At cost perspective, it will make the hosting package to be more competitive to support the customer need.