Route 1 - I've thought about this, but this would require the most work/time as i would have to v2v all the vms most likely one vm at a time. I do agree that this would be the least amount of reconfiguring and disruption as both the new 5.1 and old 3.5 clusters will be totally separate/isolated the whole time.
Route 2 - So ESX 3.5 and ESXi 5.1 can coexists in the new 5.1 cluster? Does it matter which host, either 3.5 or 5.1 I add to the new 5.1 cluster first? Also, the 5.1 hosts don't need access to the 3.5 FC SAN storage since cold migration will be used for this to move the vms from the 3.5 host to 5.1 as well as it's storage, correct?
On the storage side, the 5.1 hosts which will be using iSCSI and 3.5 hosts which is using FC Storage will not have to have access to each others SAN, but can exist in the new 5.1 cluster?
thanks again for the quick response and it's well appreciated,