My current system:
2 hosts running ESXi 6.0 U2
I have added both hosts to a cluster. I am now configuring HA and the auto power-on priorities in VM/Hosts Groups and VM/Host Rules tabs. My question is, during an HA event (one host goes down), on the other still functioning host, does HA power on VM's that were previously in a Powered-Off state on the down host, or does it just power on the VM's that were running on the down host? I am assuming its the latter and checks the CleanShutdown state in the .vmx file, but just want to confirm.
correct, it uses the cleanshutdown state to understand why a VM is powered-off. If it was powered-off cleanly then there's no need to power it on during a failure. I described most of these things in here: https://www.rubrik.com/resources/white-papers/19/clustering-deep-dive-ebook