I've been using a QNAP TS-559 Pro+ for a couple of years now with great results. With five 1TB drives, under RAID 5, performance is good (home lab environment). With dual Gb NIC's, using iSCSI to connect to my ESXi 5 host, throughput isn't an issue. It's also easy to administrate/manage with plenty of features to keep you going.
I have about 2TB carved into LUNs on my device, with the balance configured as a share for my other systems. This allows me to backup files to the appliance and make sure they're protected (RAID 5) after all. I also have a 'spare' hard drive still in it's wrapper, just in case one inside the chassis goes south on me.
While this solution isn't as cheap as setting up some old hardware as an open source iSCSI appliance, it's rock solid and damned near silent. Look at what SimplyNAS has in your budget range, as well as check out the spec's on QNAP's web site. When I go for another storage chassis, I'll probably end up with the TS-659 Pro II. We'll have to see what drives are available at the time, that's on QNAP's compatibility list for the chassis.
BTW, I run mine 24x7 with 8 VM's accessing it all the time. I have the LUNs sized at about 500GB each (the ISO and Templates LUNs are smaller) so I only put a few VM's on each. Having the two Gb NIC's on the chassis configured for high performance does help. Plus it's easy to setup.
I did look at using open source software before getting the QNAP chassis. It helped to put it into perspective. The QNAP software makes it much, much, much easier to get setup and maintain. Plus, you don't need to worry about hardware compatibilty issues. Or that old hardware deciding to give up the ghost on you. Personally, I'd rather spend a few more dollars getting something that has a higher reliability factor, and is easier to administrate.
