Aim : To form a 2-node active/passive cluster on Microsoft Windows 2008 guests with iSCSI disks on top of VMware ESX Server.
Procedure : I am assuming that the reader is well versed with Microsoft Windows 2003 Clustering and software-only iSCSI technology. If that is not the case then I would like to request reader, please first understand that and follow the procedure mentioned over here.
1. Three types of disks are supported in Microsoft Windows 2008 failover clustering : serially attached SCSI disks (SAS), iSCSI & FC HBA. We are looking at software-only iSCSI disks inside the guests. In order to achieve this we need to first deploy a VM which will act as a iSCSI target appliance. Configure this VM with multiple virtual SCSI disks (one disk for OS and others to share with guests as iSCSI ove LAN, better to use different SCSI controllers). Install Microsoft Windows 2003 SP1 and then install iSCSI target software (e.g. StarWind iSCSI Target ). Open iSCSI management console which gets installed as a part of target software and add devices. Add devices is a simple wizard which will create image file out of SCSI disk. This is getting hosted with iSCSI over IP on a default port 3260. Add all the locally attached SCSI disks using add devices wizard. You are done with hosting iSCSI target appliance.
2. To attach, configure and access above iSCSI disks in guest VMs (used for clustering), you need to have iSCSI Initiator software installed and configured. Microsoft provided the same as a part of operating system in their windows 2008. Configure IP or IPs in iSCSI Initiator in both the VMs to talk to above configured iSCSI target appliance. This is also a simple configuration wehre in you are suppose to provide the IP or IPs of iSCSI target applinece and discover the path or paths to disks. Please ensure that the sharing of disks configured correctly and the disks are available even after rebooting of VMs.
3. You can now follow Micorosoft Windows 2008 failover clustering setp-by-step instructions. Validation configuration wizard gives two warnings for Microsoft signed drivers used in VMs against display and mouse. Rest all the tests gets passed successfully which is in-turn a green signal to go ahead and form the cluster.
All the best guys...!
Everyone interested in the initial review and making his own life easier can drop us an e-mail to the 
Everyone interested in the initial review and making his own life easier can drop me an e-mail to the anton@rocketdivision.com. Thanks!
