I recently got this error while trying to P2V a server. The reason? On default settings when setting up a VMFS volume (block size 1) the maximum size of a virtual disk is 256 GB’s.
Now what can you do to fix this? Well sad answer is you can reformat you VMFS volume with a different block size.
Block size Max Virtual Disk size
1 256 GB
2 512 GB
4 1024 GB
8 2048 GB
If that isn’t something you care to do then keep in mind by default VM Converter will take the maximum size of each volume on your physical server (c,d,e, etc) and lump them all into one physical disks. You can however go into the settings and create a virtual disk for each volume (something I recommend doing regardless). You can also adjust the size of the target virtual disk to eliminate free space, IE if your D drive is 325 GB but has 80 GB free then by default it will try to create a 325 GB virtual disk (and fail) but you can adjust the virtual disk size down to 245 GB.
Hope this helps