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How do I use VMWare to setup 3 virtual 2003 web servers using WLBS and IIS?

Our company currently uses 6 Windows 2003 servers to run our public websites.  They work together using WLBS, with 3 being in 'cluster' at any one time.  I was asked to migrate over to a single box VMWare embedded host to reduce heat/space.  To start I am attempting to setup 3 virtual web servers on one VMWare embedded box.

The physical web servers are setup like this:  each has 2 nics, one plugged into Network A and one plugged into Network B.  Network A is our standard company network, B is reserved for our webservers.  The WLBS is setup on Network B.  

To get it out of the way, yes I have licenses for everything.  We have a datacenter edition of 2008/2003 that allows for unlimited # of servers (as long as it's only on the one physical machine).

Here is what I've attempted so far:
I first tried copying a physical server, 3 times, and going from there.  I renamed each, let each setup a new mac address for the virtual nics, and it seemed to work.  However when we tried running IIS, it gave many errors, apparently the copy wasn't perfect?  In any case, we decided against copying, I started over, and setup 3 new virtual  Windows Server 2003s.  Had our webmaster install and configure IIS while I setup the network stuff.  It was able to ping other machines on both Networks A and B.

IIS seemed to work better but as soon as I activated the WLBS on the first virtual server, things went bad.  ALL traffic began going to that single virtual server (it should have been split between the 3 physical servers and the 1 virtual).  There were also some recurring IIS errors but they are unrelated I believe.  We disabled the virtual nic the WLBS was running on and after about 6 minutes, traffic resumed to the 3 physical servers and the websites were back up.

Here is how I've configured the 6 physical nics on the VMWare host:
I first setup 2 virtual switches.  1 for Network A with 3 nics, and 1 for Network B with 3 nics.  Then in the setup for each virtual server, I assigned 2 virtual nics, one pointing to Switch 1 and one to Switch 2.  

When that failed, I decided perhaps I needed to be more specific on Network B.  So I setup 4 virtual switches.  1 for Network A (since that one seemed to have no problems sharing nics) and 3 separate ones for Network B (each virtual switch containing only one physical nic).  Then for each server I setup 1 v-nic to A and 1 v-nic to it's own switch with it's own nic.  No nic-sharing on B, so should work!  

Only, not so much.  Same thing as before.  As soon as we type WLBS Start, it successfully joins the cluster, and then ALL traffic goes to it.  Problem is, IIS is still not quite working right.. and I can't have the websites down while the webmaster tweaks the IIS config.  So I need to get this virtual web server to share WLBS with the physical servers.

So, specific questions:  Have any of you tried using WLBS with both physical and virtual 2003 servers?  Is WLBS perhaps not compatible with VMWare? (please, I hope not)

Is there another, perhaps better, way of doing this than I've tried?  I'm very open to suggestion as this has consumed a lot of time already.  I was (am) a novice to virtualization and I am learning as I go, so all help/info would be greatly appreciated.

Thanks!

*edited to rezone it*
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philtpaik
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That was really helpful advice actually, thanks Philtpaik!

For the specific problem I was experiencing, I found this, which seems to have resolved it:

http://kb.vmware.com/selfservice/microsites/search.do?language=en_US&cmd=displayKC&externalId=1556

I'm running Microsoft Network Load Balancing (NLB) configured in unicast mode. Network traffic is directed to only one of the nodes. What is wrong?

It gives a detailed and complicated explanation.. but the fix is to simply change 1 setting in the VMWare config.  If anyone else runs into the problem, here:

Log on to the VI Client and select the ESX Server host.

Click the Configuration tab.

Choose Networking and, for the virtual switch, select Properties. The vSwitch Properties dialog box opens

On the Ports tab, select the virtual switch and click Edit.

Click the NIC Teaming tab, set the Notify Switches option box to No.