SQL Server Failover Clustering on Physical machine VS Database Mirroring on VM

Hi,

I need to clarify some concerns with regard to the options available on SQL Cluster deployment, but before that let me give you a background on the infra layout so we are on the same page:

We have two physical servers + FC SAN (iscsi not supported in the current model) to setup Hyper-V using data center edition. The Virtual Machines to be setup as follows:

1. Physical Server1: VM1 - DC01 (Domain Controller) VM2 - Web01 (Web-Frontend) VM3 - App01 (SharePoint) VM4 - SQL01 (SQL DB)***************

2. Physical Server2: VM1 - DC02 (Domain Controller) VM2 - Web02 (Web-Frontend) VM3 - App02 (SharePoint) VM4 - SQL02 (SQL DB)****************

SQL Version: SQL Server 2008 R2 on Windows 2008 R2

The initial plan was to setup 2 node SQL cluster on two guest machines (SQL01 & SQL02), however, with the limitation of guest cluster being supported only on iSCSI based Storage and the current FC SAN does not support we had to look for alternate options. This leaves us with limited choices as changing of the FC SAN to FC/ISCSI SAN is not an option at all. The options that may work are as follows:

1. Setup SQL cluster on the physical servers (but remember hyperv & vm's are already running on it) - is this workable, supported or recommended by Microsoft.

2. Setup 2 VMs with SQL and enable DB mirroring between them but will that provide the same kind of resilience as in the case of failover cluster

If the option 1 is workable but not a best practice, can I still go ahead and setup the SQL failover cluster on the physical servers and will there be an issue with support from Microsoft. Appreciate a quick response to this as the infra deployment has already begun and has to be completed in the next couple of days.

Thanks!