We currently have a cluster of 4 HP DL360 G5s running ESX3.5 with Virtual Center running them. If we add more servers to the cluster is there any reason at all why we could not use the new ESXi free version and add those servers to the cluster? Also, I assume that ESXi is installed on a Hard Drive just like ESX 3.5.
I would think this would be a much cheaper solution then buying the ESX licensing. What is the benefit of one versus the other? Will it support HA, Vmotion, DRS, VCB etc?
ESXi Free doesn't come with licensing for the VC agent, HA, etc, so you would still have to purchase the correct level of VI licensing (Enterprise if you're using vmotion). See the below PDF for what you get at each licensing level. You would also have to update your current hosts to ESX 3.5 Update 2 to be able to run a mixed cluster of ESX and ESXi hosts.
Licensed features - page 61 - http://www.vmware.com/pdf/vi3_35/esx_3i_i/r35/vi3_35_25_3i_i_setup.pdf