How about this one, a slight change which i've underlined on option number 2? The reason that I'm leaning towards option number 2 is that it's easier for me to do. Our new 5.1 hosts don't have hba's, so I would have to request or scrounge around for them, install it and run the fibre cables. It's doable, but again lots more work.
2) Present the iSCSI storage to the OLD 3.5 hosts, perform a SvMotion to switch over to the iSCSI datastore, shutdown the vm, browse to the Virtual Machine folders and register the Virtual Machines on the new ESXi 5.1 hosts.
thanks,