I'm struggling to understand why ZFS makes enterprise storage obsolete. One of the benefits of the SAN is that it is shared amongst a number of servers.

How does ZFS help with that? Assuming you install SmartOS as virtualisation host, you'd still need some kind of shared storage.

[Edit:] The reason I point this out is that if you lose a host, you lose all VMs running on that host. And then you won't easily be able to get them back online on another host if you've lost your storage as well.