I thought I would try a simple test by connecting a LUN to a test Server 2008 VM, from a different Simulator on the same ESXi host.
When it came down to the final step, management console reported formatting the new partition - and appeared that it hanged. But in the end, some 10+ minutes later, it managed to format a 200MB disk. It's freakishly slow, even for a test lab.
Could it be an internal ESXi networking issue?