Hi Shannon.
I've mentioned this many times in this forum, but I'm a big fan of VMWare as it makes machine management much easier.
It is true that VMWare does give you an overhead on disk I/O (~10%), but ESX is constantly refining the code to reduce this.
What I tend to do (where possible) is to use VMs, and only put low disk utilisation VMs on the same storage as the NS box. To overcome the overhead of the virtualisation, I spec the storage with a few extra spindles than I would have otherwise.
The time (and therefore cost) savings if using virtualisation (in my opinion) soon pay dividends even taking into account the slightly increased spec.
I also try to avoid using remote SQL databases for NS. And in the case in point of virtualising your NS, but having a remote SQL DB you've kinda lost the advantage of virtualisation. You can't now snapshot your NS VM before an upgrade, test and rollback. The remote SQL database has been upgraded, and this hasn't been rolled back by the process. You've now got an extra process of backing up and restoring your NS database too.
Kind Regards,
Ian./