Best Method Learned: DO NOT TRY TO RE-SIZE or CONVERT THE SOURCE DISK TO THIN when using vCenter Converter Standalone, if you want to reduce the size of the original disk, then do this using Storage vMotion after the conversion is completed, see details below:

I HAVE RELALY BEEN THERE AND WENT THOUGH ALL THE PAIN ONCE, now I am happy after I did this intensive research on P2V using backup image.

8:20PM Start, disconnect physical server external network cables connecting to the Internet, leaving internal LAN on for VPN, so I am still able to RDP into the server.

8:36PM Take a final incremental snaphot on the physical server using True Image Server Echo (TIS9.1/TIS9/TIS8 all having some kind of wired problem during conversion, so better upgrade the TIS version on the physical server first)

8:40PM Since I’ve already copied all the previous TIS backup files to the vCenter server beforehand, so it only took me 4 mins to copy this final incremental backup file over.

9:04PM Use vCenter Converter Standalone to import TIS backup files and converted into Equallogic SAN volume (which is Thin-Provisioned), it’s so fast, 120GB in about 24 mins (about 83MB/s over 1Gbps). If you are going to do Re-size or Make it Thin at this stage, the conversion process is going to take at least 3-4 times longer and still failed at the end even you are able to boot the VM (You will either face login failure with correct password or some service will NEVER START for un-known reasons), so my suggest would be just KEEP THE SOURCE AS THICK (aka flat) and do all the THIN later, keep reading please.

10:08PM Finished re-configuring VM, disabled all the unnecessary services, uninstall all no need software and drivers (luckily I still have that physical running side by side in the above for comparison just in case some configuration need to be made), finally the VM is running on Version 7, with VMXet3 driver and using Para-virtualized for Disk Controller (this really boost the performance by at least 3 to 5 times, booting the same W2K3 physical server required 7 mins before, using normal SCSI Parallel is about 4 mins, using Para-virtualized is about 30 seconds!!! Wow!!! Of course, I am not sure if it’s to do with ESX4.1 and EQL FW5.0.2 supports Storage Hardware Acceleration and MEM. Everything is just so much faster than before. However you still have this WASTED big 120GB THICK disk that’s converted form a RAID-5 (36GBx5) Physical Server.

10:20PM Now is where the magic happens. I then did a Storage vMotion (ie, migrate the datastore) to the real VMFS volume where it should be (it was on a temp VMFS just for conversion), AND NOW YOU CAN USE THIN-PROVIIONING, guess how long does it take for Equallogic PS6000XV to do that? Yes, total 12 mins to migrate that 120GB thick and converted to thin (about 30GB)! Amazing! Again, I am pretty sure it’s something to do with ESX4.1 and EQL FW5.0.2 supports Storage Hardware Acceleration and MEM, that VAAI storage hardware acceleration thing is really kicking in!

So the whole thing took about 2 hours, seemed easy right? However I didn’t tell you I’ve spent the whole week about 30 hours to do many trial and errors with different conversion method things like use TIS Echo to convert the TIBs into VMDK (WASTE OF TIME, DON’T TRY IT), Boot TIS rescure media and then directly restore the image into VMDK (waste of time), re-size or thin the source disk and then found out I can no longer login and even I can login, some important services just never start. What about real-time conversation, FORGET IT! It will take FOREVER (so slow) and you will encounter even more problems then using a backup image.

So to put things into summary, here is what you need to do if you have True Image Server or other backup files for P2V conversion. 

1. Use vCenter Converter Standalone and simple import the TIB files, do not make it thin and do not re-size it. This proved to be the FASTEST conversion speed. (about 85-95MB/s over a 1Gbps COS link)
2. Then use Storage vMotion to do the actual Thin-Provisioning, if you have VAAI storage hardware acceleration, it will really help in this stage. You will see under esxtop iSCSI network traffic is really low, but IOPS is really high, so you know VAAI is working hard on the array itself and ESX Host CPU is almost nothing during the Storage vMotion as ESX Host no longer required if VAAI or SAN OFFLOAD is being used.
3. Make sure you use Echo version of True Image Server to ensure the most compatible or safe conversion for your VM. TIS9.1/TIS9/TIS8 just created too many unknown problems

 * One more thing, DO NOT TRY TO CONVERT TWO VM at the same time if the TIS backup images are on the same local harddisk partition, it’s just too much for your server and somehow vCenter Converter will lock TIS files of one VM, so when you try to convert the 2^nd VM, the size will somehow misleading (ie, it’s actually 30GB used, but it will show 120GB fully used, I think it’s related to vCenter Converter can only lock one TIB file at the same time. If you try to force converting the 2^nd VM, strange thing DO HAPPEN, so just take your time, have a cup of coffee of tea, sit back and relax.)