I ran into a very interesting issue. Whenever we took a quiesced snapshot of Windows 2008 R2 VMs running on an ESX 4.1U2 host we saw the following error in the event viewer and the snapshot would fail:

Event ID 57 ntfs Warning
The system failed to flush data to the transaction log. Corruption may occur.

Event ID: 137 ntfs Error
The default transaction resource manager on volume \\?\Volume{806289e8-6088-11e0-a168-005056ae003d} encountered a non-retryable error and could not start. The data contains the error code.

Event ID: 12289 VSS Error
Volume Shadow Copy Service error: Unexpected error DeviceIoControl(\\?\fdc#generic_floppy_drive#6&2bc13940&0&0#{53f5630d-b6bf-11d0-94f2-00a0c91efb8b} - 00000000000004A0,0x00560000,0000000000000000,0,0000000000353B50,4096,[0]). hr = 0x80070001, Incorrect function.

There is actually an ongoing VMware community thread 309844, that keeps talking about the issue. There is no clear solution to this as of yet, but here is what I did to get around the issue:

  1. Disable and remove the Floppy device from the VM (it’s not used any ways)
  2. Downgrade vmware-tools versions from 8.3.7 (ESX 4.1U2) to 8.3.2 (ESX 4.1GA)

To find out your version of vmware-tools follow the instructions in VMware KB 392. If you are running anything other than 8.3.2 then you can download the older tools from here:

For 32 Bit:

http://packages.vmware.com/tools/esx/4.1/windows/x86/VMware-tools-windows-8.3.2-257589.iso

For 64bit:

http://packages.vmware.com/tools/esx/4.1/windows/x86_64/VMware-tools-windows-8.3.2-257589.iso

Then remove your current version of vmware-tools following the intructions from ESXi and vCenter Server 5 Documentation > vSphere Upgrade > Upgrading Virtual Machines. After you are done with that, mount the ISO that you downloaded from above. To do so, you have many options:

  1. Using vSphere Client connect the ISO (locally stored on your local machine) to the VM (instructions found here)
  2. Upload the ISO to a datastore of an ESX host and connect it to the VM (instructions found here)
  3. Upload the ISO directly to the VM and mount it using a third party tool (ie VIrtualClone Drive and Daemon tools)

After the ISO is mounted just execute setup.exe to install the older version of vmware-tools. Now your quiesced snapshots should work.