Microsoft has an article available regarding Virtual Server 2005 R2 and iSCSI. I've been digging around on the forums and it seems the only way to really get the performance out of this is by having the iSCSI storage on the actual host machine. I haven't played with it, don't know enough about it but I do know iSCSI is way cool and I'm dying to play with it. Here's the link: http://www.microsoft.com/downloads/details.aspx?FamilyID=d112aa63-a51e-4722-a41b-98b3ab3700a3&displaylang=en

So in the Virtual Server how to on setting up a 2 node cluster there was mention that you should select the SCSI drive emulatored because the IDE emulator was slower than the SCSI one and that this was true even if you were running on IDE disks. Strange, right? Virtual PC Guy recently wrote a new blog entry that really sums up the two versions of disks and why one over the other: http://blogs.msdn.com/virtual_pc_guy/archive/2006/02/06/525487.aspx So now you're going to run off, create a SCSI disk and install the OS and wait and wait and wait and start cursing me because my god is that install taking a day and night. By the time it's done though you'll install the emulator and lo and behold it's a ton faster now. What gives? Why was the install so damn slow?  It turns out that the SCSI drive isn't actually faster until you load the driver from the VM additions. So how do you get around this? Well, during install press F6 to load a 3rd party driver. If you go back to the Floppy disk in the machines configuration and and tell it to mount a known Floppy disk image you'll see there's one on there called something like "VM Additions SHUNT SCSI drivers" mount that bad boy and then go back to your install and have it read the drivers off of this disk. It will now use the VM additions SCSI drivers during the install and you won't have to wait 3 hours for the install to finish… This is a huge time saver… Oh and make sure you read that blog entry on the differences about the two and why SCSI versus IDE, it's a huge question that seems to get pounded time and time again.