I completed my test:
production SQL server: Physical windows 2008 R2 SP1
target of clone SQL server: Virtual Machine on ESX with windows 2008 R2 SP1
Storage system: a fas 3160 with FC and iscsi with Ontap 8.2.3 7mode
SnapDrive 7.1.1 (on both servers)
SMSQL 7.2 (on both servers)
SQL prod db are FC connected to Storage (no RDM).
Clone server only has RDM and MS iSCSI lun's.
once both windows server (in same AD domain) had dns connection to the storage system and credentials were set from both of the windows servers,
I could succesfully clone a production SQL db into the target server. the clone was mounted on clone server with MSiscsi.
This was achieved even without the registry key, since my esx host which hosts the VM whcih is the target of the clone does not have FC connection to that specific storage server.
This shows you that if you force SDW to use Msiscsi, it will use it.
So unless you are doing something different, this should work and there is no disappointing limitation.
please work with your support engineering to insist on the correct implementation of the reg key and restart your snapdrive service.
hope that helps,
Domenico