Sorry I don't remember any of the details on the configuration only on the errors. My thing is tape backup and especially troubleshooting errors on SCSI and SAN, and so that was my focus. I left it up to other to ensure the HyperV configuration was correct. I know this does not help you much, but like I said for what it's worth. Now that I think about it, a buddy who does work a lot with both HyperV and VMware setup, and another who does a lot of onsite installations had told me not to install a backups server under a virtual installation when I went to them for help on those problems.
As far as iSCSI goes (this is from a general perspective and not specific to VM) it is still talking SCSI and prone to the same SCSI errors. However most of the time when I have seen errors it was when the Microsoft iSCSI initiator was used. 3rd party initiators work much better from what I've seen.
Here is my bottom line, if you like try things out and don't mind a challenge if it comes up, go for it. If on the other hand time is an issue and you have no desire to be on the bleeding edge rethink you strategy.
For example just about any cheap box will work well for a backup server, RAM and a good controller are key. The thing about a backup server is that more often it will have to be restarted for updates than an application server which can cause a problem if production applications are running on that box.
