We are doing NFS in VMWare 4.0U2 production, 50K users using OpenSolaris 
SNV_134 on SuperMicro boxes with SATA drives. Yes, I am crazy. Our experience 
has been that iSCSI for ESXi 4.x is fast and works well with minimal fussing 
until there is a problem. When that problem happens, getting to data on VMFS 
LUNs even with the free java VMFS utility to do so is problematic at best and 
game over at worst.

With NFS, data access in problem situations is a non event. Snapshots happen 
and everyone is happy. The problem with it is the VMWare NFS client which makes 
every write an F_SYNC write. That kills NFS performance dead. To get around 
that, we're using DDRdrive X1s for our ZIL and the problem is solved. I have 
not looked at the NFS client changes in 4.1, perhaps it's better or at least 
tuneable now.

I would recommend NFS as the overall strategy, but you must get a good ZIL 
device to make that happen. Do not disable the ZIL. Do make sure you set your 
I/O queue depths correctly.
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