Great question! - in my opinoin this is one area where ESX is quite poor. If you turn on strict admission control - from what I can gather, ESX checks to see which VM has the highest cpu reservation and then works out how many of these VMs could be fitted into any one host based on the hosts physical CPU processing capacity. Take this number and multiply it by how many hosts you have in your cluster (minus the 1 host allowed to fail) and you have your max VMs per cluster before you get the error/warning - "Insufficient resources to satisfy failover level on cluster".
You only need one large VM reservation for it to upset the HA algorithm and skew the number of machines you could actually fit on the cluster.
