I figured out how to make this work under VMWare.
I added the iSCSI drive to the ESXi host instead of using a software initiator inside of the SBS 2008 guest. I then map it to the guest as a Mapped Raw LUN. It appears to the guest (SBS or the recovery DVD) to be a local SCSI drive.
For drive swapping, I add/remove the Mapped Raw LUN from the guest using vCenter. The drive appears/disappears from SBS without any apparent problems. The first time through requires some fussing with writing signatures to disk, etc inside of windows.
I'm using FreeNAS for the SAN, and can hot swap the drives by issuing atacontrol attach / detach commands and then restarting the iSCSI service on FreeNAS.
Not exactly a pain-free process, but it is quick enough for a weekly offsite drive swap.
Is the virtual machine a domain controller?
Have you tried below from http://www.veeam.com/kb1697
vssadmin list writers
The results will appear as:
Writer name: 'NTDS'
Writer Id: {b2014c9e-8711-4c5c-a5a9-3cf384484757}
Writer Instance Id: {ee24b741-eaf7-4663-8f95-b92ae8c5e164}
State: [1] Stable
Last error: No error
If not listed as stable reboot the DC.
──────────────────────────────────────────────────────────
Verify that Automatic mounting of new volumes enabled.
──────────────────────────────────────────────────────────
From a Run command (Win+R) execute the command diskpart.
From within Diskpart run the following command.
automount
If the results do not show “Automatic mounting of new volumes enabled.” Run the following command:
automount enable
──────────────────────────────────────────────────────────
Verify that there are no .bak keys in the ProfileList within the Registry.
──────────────────────────────────────────────────────────
From a Run command (Win+R) execute the command regedit.
Within the registry navigate to:
HKLM\Software\Microsoft\Windows NT\CurrentVersion\ProfileList
There will be a list of Keys, you must remove any ending in .bak
Best Answer
Since it took me some hours to solve this issue the real problem was that on that server I have installed Symantec System Recovery (Symantec Backup Exec produce the same problem) and on that day I have uninstalled it. It seems that Veeam and Symantec are using some shared files/services so by uninstalling the Symantec it breaks the Veeam configuration.
Since the error explanation point on "Network issue" the solution is to run these 2 files: VeeamTransport.msi, vPowerNFS.msi and repair the installation. You can find them on this path:
C:\Program Files\Veeam\Backup and Replication\Backup\Packages