I’ve been struggling with this error message for moths and I’m not the only one. Duncan Epping over at Yellow-Bricks has experienced similar problems.
When using PXE and kickstart on ESX 4.x, the ESX boots from PXE but the installation fails and in the DHCP server logs there is a new unauthorized client requesting an IP. VMware has released a knowledge base article with the resolution for this problem.
During the installation of ESX 4.x, the VMkernel starts and it boots the service console in a virtual machine. As such, the service console is using a virtual MAC address that is generated randomly at runtime. During the install, the MAC address is written to disk and becomes persistent, but each time you boot the installer, the COS MAC is different.
If you are using MAC address based access control in DHCP, deny unknown-clients, you cannot authorize the service console to get an IP from DHCP. There is no way to predict what the vswif0 MAC address will be.
In large deployments, specifying static IP addresses is not convenient. You would need to create a separate PXE configuration for each host. To workaround this, put the IPAPPEND 1 parameter in the PXE configuration for the host.