ESXi Configuration

If you're a small shot and don't have a server that need a lot of I/O then RAID5 would work just as well.  I would suggest that you create two partitions so that the OS would go on one partition and the datastore on the second one. This is because if you install ESXi on the entire array you would only have a 1MB block size and thus max. partition of 256GB.

I would create 5x500GB (with hot spare) array RAID5 with multiple volumes for datastores.  If you have some high IOPS VMs than create a 2x500 raid1 and 4x500 datastore for normal VMs with a global hot spare.

Your limit is the type of drives you have since most SATA drives are 7200RPM you're not going to get the best performance and the more drives in the array the better the performance.  

If you do not need more than 1TB of storage for your VMs, I would suggest the following configuration to maximize read/write (mostly write) performance and still have redundancy in your array.  I prefer to have all my spindles in use rather than dedicating a drive as a hot spare.

2x500GB (RAID1) for VMware OS
4x500GB (RAID10) for VMs

Thanks for the comments.  I'm actually running the ESXi from a USB memory stick.  I thought this was the perferred configuration and the R710 server makes this incredibly easy.  Should I change this and install the ESXi to the actual drives?

Thanks,
Chris