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According to this article :
"The ScratchConfig.ConfiguredSwapState and ScratchConfig.ConfiguredScratchLocation settings are required for HA in ESXi 3.5. They are not required for HA in ESXi 4.0..."
Hope it helps.
I have already seen that KB article. I the scratch config not used for updates? Because i tthought i have seen some threads regarding an issue.
I had to use scratch space to load the network driver package onto Dell blades running embedded ESXi, due to insufficient disk space. I also used this for persistent logging.