Yes iSCSI is supported. Please refer to this link at VMWare for further information on iSCSI. I have done many ESX server iSCSI implementations and have had great success with them. It is a great solution for the SMB market if you don’t want to spend the money on fibre channel.
HP Accelerated iSCSI is not the same as Hardware iSCSI, HP accelerated as far as i am aware is not the TOE version, it takes some of the load but not all of the load in respect to what TOE does. its a hybrid.
it is a licensed version upgrade as well, there is not much difference in using software enabled iSCSI with Vmware and HP accelerated iSCSI to be honest so is it worth the extra money?
if you have HP blades then the accelereated version is already activated as is ILO advanced.