Hi,
Sorry if this causes more confusion than helps.
I note that you tried to gracefully shutdown virtual machines by removing them from the inventory. This does not shutdown virtual machines, the only way to do this with an isolated host are as follows:
- via some sort of remote tools to the virtual machines, i.e. RDC if Windows servers (this assumes the virtual machine network is still up and running)
- via the Service Console (assumes you have console access if the Service console network is down)
- physically power the host off
Obviously the preference is to gracefully power the virtual machines off, however this is not always possible and if the virtual machines are still running but not contactable, often the business will dictate the nasty power off. Having said that most OS these days can recover from a power off after running some logs back or a chkdsk or two 
In regards to what is the best open for Host Isolation, the answer really depends on your environment. Personally I tend to prefer the Leave VMs powered on option as this allows me to determine if I actually have an isolated host that affects my virtual machines, or just a host that has no access to Service Console. If the host actually goes belly up, this option will still allow the virtual machines to start on another host. For example, lets say the vSwitch that hosts the Service Console loses connection to the network (e.g. both NICS die) however the vSwitch the virtual machines run from is fine, do you really want the virtual machines restarting during the day or would you rather control this to take the host down after hours?
Kind regards.