Free ESXi fully supports hardware and software iSCSI, Fiber Channel or NFS.
VMware vExpert '2009
Yes ESXi Free does support iSCSI, both via a dedicated iSCSI HBA and the built in software initiator
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Tom Howarth VCP / vExpert
VMware Communities User Moderator
Contributing author for the upcoming book "[VMware vSphere and Virtual Infrastructure Security: Securing ESX and the Virtual Environment|http://my.safaribooksonline.com/9780136083214]”. Currently available on roughcuts