KennyView wrote:

When I take a look at http://kb.vmware.com/selfservice/microsites/search.do?language=en_US&cmd=displayKC&externalId=103795..., I see indeed the in guest is supported

When I take a look at http://pubs.vmware.com/vsphere-50/topic/com.vmware.ICbase/PDF/vsphere-esxi-vcenter-server-50-mscs-gu... page number 9 on top of the page, the document tells RDM is recommended ?

What I am missing?

Yes RDM is definatly recommended, the issue is your using native iSCSI for your storage protocol for ESXi meaning RDMs on that storage is not supported for MSCS

from the article "Fibre Channel – Configuration using shared storage for Quorum and/or Data must be on Fibre Channel (FC) based RDMs (physical mode for cluster across boxes “CAB”, virtual mode for cluster in a box “CIB”). RDMs on storage other than FC (such as NFS or iSCSI) are not currently supported"

because you are using iSCSI storage the only "supported" option you have is "in guest"